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Morrocco v. Limetree Enterprises, Inc.

A-4361-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

CONTRACTS; LIQUIDATED DAMAGES — Liquidated damages under a contract are enforceable if they are reasonable under the circumstances and a contracting party’s bargaining power will not be treated as unequal just because that party had a strong desire to enter the agreement, not the necessity to enter into an agreement.

An entertainment booking company contracted to provide a wedding band for its customer’s daughter. The contract called for a deposit to be paid at signing, a subsequent deposit, and a final payment to be paid two weeks prior to the wedding. The contract stated that the first two deposits were non-refundable if the customer canceled the agreement less than thirty-one days prior to the wedding and explained that the deposits were to compensate the company for monies paid to musicians who were booked for the engagement. The customer cancelled the contract after the wedding itself was cancelled. The customer requested a refund of the first deposit, but never received it.

Little more than one year later, the customer contacted the company and sought to book the same band for his daughter’s wedding. The parties entered into a second contract which had the exact same terms as the first contract, except for a higher price. The customer paid the deposit, but roughly three months later cancelled the second contract. The customer requested the return of his second deposit but did not receive it.

The customer sued the company for the return of both deposits. The lower court rejected the customer’s argument that the deposits kept by the company were unjust penalties. The lower court pointed out that the provisions of the contract, which allowed the company to keep the two deposits, were liquidated damages. The Court found that the portions of the contracts allowing the company to keep the deposits were enforceable and dismissed the customer’s claims.

On appeal, the Appellate Division pointed out that liquidated damages under a contract are enforceable if they are reasonable under the circumstances. It rejected the customer’s argument that his bargaining power was not equal to the company’s because the company was the only booking agent for the particular band that his daughter wanted to play at her wedding and that he was stuck with either booking the band through the company or disappointing his daughter. The Court found that the amount set as liquidated damages was not unconscionable and that the customer was not at a disadvantage because his efforts to book one particular band from the company resulted from his desire, and was not a necessity. Thus, the lower court’s dismissal of the customer’s action was affirmed.

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