liquidated damages clause in Texas

2024For a liquidated damages clause to be enforceable, (1) the harm caused by the breach must be “incapable or difficult of estimation,” and (2) the amount of liquidated damages called for must be “a reasonable forecast of just compensation.” Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991); see Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952) (observing that damages for breach of contract are limited to “just compensation for the loss or damage actually sustained”); Atrium Med.

2024For a liquidated damages clause to be enforceable, (1) the harm caused by the breach must be “incapable or difficult 39 of estimation,” and (2) the amount of liquidated damages called for must be “a reasonable forecast of just compensation.” Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991); see Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952) (observing that damages for breach of contract are limited to “just compensation for the loss or damage actually sustained”); Atrium Med.

2024For a liquidated damages clause to be enforceable, (1) the harm caused by the breach must be “incapable or difficult of estimation,” and (2) the amount of liquidated damages called for must be “a reasonable forecast of just compensation.” Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991); see Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952) (observing that damages for breach of contract are limited to “just compensation for the loss or damage actually sustained”); Atrium Med.

2024For a liquidated damages clause to be enforceable, (1) the harm caused by the breach must be “incapable or difficult 39 of estimation,” and (2) the amount of liquidated damages called for must be “a reasonable forecast of just compensation.” Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991); see Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952) (observing that damages for breach of contract are limited to “just compensation for the loss or damage actually sustained”); Atrium Med.

2015Johnson Engineers, Inc. v. Tri-Water [**11] Supply Corp., 582 S.W.2d 555, 557 (Tex. Civ.

2015See Murphy, 923 S.W.2d at 666 ; Johnson Eng'rs, Inc., 582 S.W.2d at 557 ; Robinson, 553 S.W.2d at 637 .

2012See SP Terrace, L.P. v. Meritage Homes of Tex., LLC, 334 S.W.3d 275, 287 (Tex. App.—Houston [1st Dist.] 2010, no pet.); Urban Television Network Corp. v. Liquidity Solutions, 277 S.W.3d 917, 919 (Tex. App.—Dallas 2009, no pet.) (noting that it is the defendant‘s burden to demonstrate the unreasonableness of a liquidated damages clause).

2012See SP Terrace, L.P. v. Meritage Homes of Tex., LLC , 334 S.W.3d 275, 287 (Tex. App.—Houston [1st Dist.] 2010, no pet.); Urban Television Network Corp. v. Liquidity Solutions , 277 S.W.3d 917, 919 (Tex. App.—Dallas 2009, no pet.) (noting that it is the defendant’s burden to demonstrate the unreasonableness of a liquidated damages clause).

2015Generally, that party must prove the amount of actual damages, if any, to demonstrate that “the actual loss was not an approximation of the stipulated sum.”If the amount stipulated in the liquidated damages clause is “shown to be disproportionate to actual damages,” we should declare that the clause is a penalty and limit recovery to actual damages. *6 SP Terrace, L.P. v. Meritage Homes of Tex., LLC, 334 S.W.3d 275, 287 (Tex.App.-Houston [1st Dist.] 2010, no pet.)(internal citations omitted).

2012See SP Terrace, L.P. v. Meritage Homes of Tex., LLC, 334 S.W.3d 275, 287 (Tex. App.—Houston [1st Dist.] 2010, no pet.); Urban Television Network Corp. v. Liquidity Solutions, 277 S.W.3d 917, 919 (Tex. App.—Dallas 2009, no pet.) (noting that it is the defendant‘s burden to demonstrate the unreasonableness of a liquidated damages clause).

2026Cintas-R.U.S., L.P. v. Dave’s Tubing Testing & Hot Oil Serv., Inc., No. 11- 19-00145-CV, 2021 WL 2371640 , at *4 (Tex. App.—Eastland June 10, 2021, no pet.) (mem. op.) (first citing Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex. 2005); then citing Garden Ridge, L.P. v. Advance Int’l, Inc., 403 S.W.3d 432, 449 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (Frost, J., concurring) (noting that a liquidated damages clause is for the benefit of both the breaching and the non-breaching party); and then citing 24 WILLISTON ON CONTRACTS § 65:1 (4th ed.) (Validity of provisions for li

2021See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex. 2005); Garden Ridge, L.P. v. Advance Int’l, Inc., 403 S.W.3d 432, 449 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (Frost, J., concurring) (noting that a liquidated damages clause is for the benefit of both the breaching and the non-breaching party); see also 24 WILLISTON ON CONTRACTS § 65:1 (4th ed.) (Validity of provisions for liquidated damages, generally).

2026Cintas-R.U.S., L.P. v. Dave’s Tubing Testing & Hot Oil Serv., Inc., No. 11- 19-00145-CV, 2021 WL 2371640 , at *4 (Tex. App.—Eastland June 10, 2021, no pet.) (mem. op.) (first citing Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex. 2005); then citing Garden Ridge, L.P. v. Advance Int’l, Inc., 403 S.W.3d 432, 449 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (Frost, J., concurring) (noting that a liquidated damages clause is for the benefit of both the breaching and the non-breaching party); and then citing 24 WILLISTON ON CONTRACTS § 65:1 (4th ed.) (Validity of provisions for li

2025See, e.g., Garden Ridge, L.P. v. Advance Int’l., Inc., 403 S.W.3d 432, 439 (Tex. App.—Houston [14th Dist.] 2013, no pet.) (noting that the party attempting to enforce the liquidated-damages clause “did not perform any actual studies on what costs it would incur due to vendor noncompliance” and “could not explain any specifics” as to how it came up with the figure).

2015See Khan, 2013 Tex. App. LEXIS 7976 , at *9-10 (holding lease provision at issue not a liquidated damages clause at all, so penalty analysis inapplicable); Southern Union Co., 2005 Tex. App. LEXIS 564 , at *13-20 (enforcing liquidated damages provision where party challenging provision failed to show either that harm was difficult to estimate or that the liquidated damages were an unreasonable forecast of loss); GPA Holding, Inc., 344 S.W.3d at 476 (same); Healix Infusion Therapy, Inc. v. Bellos, No. 11-02-00346-CV, 2003 Tex. App. LEXIS 9027 , *5-7 (Tex. App.— Eastland Oct. 23, 2003, no pet.)

2015Id.

2015See Khan, 2013 Tex. App. LEXIS 7976 , at *9-10 (holding lease provision at issue not a liquidated damages clause at all, so penalty analysis inapplicable); Southern Union Co., 2005 Tex. App. LEXIS 564 , at *13-20 (enforcing liquidated damages provision where party challenging provision failed to show either that harm was difficult to estimate or that the liquidated damages were an unreasonable forecast of loss); GPA Holding, Inc., 344 S.W.3d at 476 (same); Healix Infusion Therapy, Inc. v. Bellos, No. 11-02-00346-CV, 2003 Tex. App. LEXIS 9027 , *5-7 (Tex. App.— Eastland Oct. 23, 2003, no pet.)

2015Urban Television Network Corp. *476 v. Liquidity Solutions, L.P., 277 S.W.3d 917, 919 (Tex.App.-Dallas 2009, no pet.) (citing Murphy v. Cintas Corp., 923 S.W.2d 663 , 665–66 (Tex.App.-Tyler 1996, writ denied)).

2015Serv., Inc. v. Replacement Parts Mfg., Inc., 679 S.W.2d 721, 727 (Tex. App.—Houston [1st Dist.] 1984, no writ); e.g., Stewart, 245 S.W.2d at 672 (when purported liquidated damages provision provides same damages for trivial breaches as for material ones, it was unenforceable penalty); see also Lake River Corp. v. Carborundum Co., 769 F.2d 1284, 1290 (7th Cir. 1985) (liquidated damages provision constitutes a penalty if the amount required to be paid is “invariant to the gravity of the breach”).

2015See Stewart, 245 S.W.2d at 487 (where actual damages incurred by breaching party amounted to $38.50, “stipulation to pay several thousand dollars ... would be so unreasonable that no court would lend its power to enforce it”); Community Dev., 679 S.W.2d at 727 (jury findings and evidence supported claim that earnest money provision operated as penalty); Bethel, 635 S.W.2d at 843 (upholding trial court's determination that liquidated damages clause was penalty against breaching party, and limiting plaintiff's recovery to actual damages). [32] A liquidated damages provision is a penalty if it pu

2010See Travis County v. Pelzel & Assocs., Inc., 77 S.W.3d 246, 252 (Tex.2002), superseded on other grounds by statute, Tex. Loc.

2010See Travis County v. Pelzel & Assocs., Inc. , 77 S.W.3d 246, 252 (Tex. 2002), superseded on other grounds by statute , Tex. Loc.

2018See id. at 788 (noting that a defendant may be required to prove what the actual damages were to show that a liquidated damages provision is unreasonable because the actual damages incurred were much less than the stipulated amount); Magill v. Watson, 409 S.W.3d 673, 679 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (observing that “[i]f the amount stipulated in the liquidated damages clause is shown to be disproportionate to actual damages, we should declare that the clause is a penalty and limit recovery to actual damages”).

2018See id. at 788 (noting that a defendant may be required to prove what the actual damages were to show that a liquidated damages provision is unreasonable because the actual damages incurred were much less than the stipulated amount); Magill v. Watson, 409 S.W.3d 673, 679 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (observing that “[i]f the amount stipulated in the liquidated damages clause is shown to be disproportionate to actual damages, we should declare that the clause is a penalty and limit recovery to actual damages”).

2015See Khan, 2013 Tex. App. LEXIS 7976 , at *9-10 (holding lease provision at issue not a liquidated damages clause at all, so penalty analysis inapplicable); Southern Union Co., 2005 Tex. App. LEXIS 564 , at *13-20 (enforcing liquidated damages provision where party challenging provision failed to show either that harm was difficult to estimate or that the liquidated damages were an unreasonable forecast of loss); GPA Holding, Inc., 344 S.W.3d at 476 (same); Healix Infusion Therapy, Inc. v. Bellos, No. 11-02-00346-CV, 2003 Tex. App. LEXIS 9027 , *5-7 (Tex. App.— Eastland Oct. 23, 2003, no pet.)

2015See Newsom v. State, 922 S.W.2d 274, 281 (Tex.App.-Austin 1996, writ denied); Baker v. International Record Syndicate, Inc., 812 S.W.2d 53, 55 (Tex.App.- Dallas 1991 , no writ).

2015Co., 207 S.W.2d 414, 418 (Tex.Civ.App.-San Antonio 1947, writ dism'd); accord RESTATEMENT (SECOND) OF CONTRACTS § 356 cmt. b (1981) (identifying the time of making a contract as the moment to evaluate the reasonableness of a liquidated damages clause).

2014Co., 207 S.W.2d 414, 418 (Tex.Civ.App.-San Antonio 1947, writ dism'd); accord Restatement (Second) of Contracts § 356 cmt. b (1981) (identifying the time of making a contract as the moment to evaluate the reasonableness of a liquidated damages clause).

2015Hamilton v. Tex. Oil & Gas Corp., 648 S.W.2d 316, 321 (Tex. App.--El Paso 1982, CONCUR writ ref'd n.r.e.).

2005Hamilton v. Tex. Oil & Gas Corp., 648 S.W.2d 316, 321 (Tex.App.El Paso 1982, writ ref'd n.r.e.).

2015See Stewart, 245 S.W.2d at 487 (where actual damages incurred by breaching party amounted to $38.50, “stipulation to pay several thousand dollars ... would be so unreasonable that no court would lend its power to enforce it”); Community Dev., 679 S.W.2d at 727 (jury findings and evidence supported claim that earnest money provision operated as penalty); Bethel, 635 S.W.2d at 843 (upholding trial court's determination that liquidated damages clause was penalty against breaching party, and limiting plaintiff's recovery to actual damages). [32] A liquidated damages provision is a penalty if it pu

2010See Stewart, 245 S.W.2d at 487 (where actual damages incurred by breaching party amounted to $38.50, “stipulation to pay several thousand dollars ... would be so unreasonable that no court would lend its power to enforce it”); Community Dev., 679 S.W.2d at 727 (jury findings and evidence supported claim that earnest money provision operated as penalty); Bethel, 635 S.W.2d at 843 (upholding trial court’s determination that liquidated damages clause was penalty against breaching party, and limiting plaintiffs recovery to actual damages).

2015Quasi-estoppel is appropriate where "it would to provide more than a "scintilla" of evidence to support be unconscionable to allow a person to maintain a position the conclusion that there is a genuine issue of material fact inconsistent with one to which he acquiesced, or from for trial). which he accepted a benefit." Lopez v. Munoz, Hockema The district court also held that the $ 100 per day & Reed, L.L.P., 22 S.W.3d 857, 864 , 43 Tex. Sup. Ct. J. provision was not a reasonable estimate of just compen- 806 (Tex. 2000) (citing Atkinson Gas Co. v. Albrecht, sation [**23] for the anticipated da

2015Quasi-estoppel is appropriate where “it would be unconscionable to allow a person to maintain a position inconsistent with one to which he acquiesced, or from which he accepted a benefit.” Lopez v. Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 864 (Tex.2000) (citing Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 240 (Tex.Ct.App.1994)).

2009See Prince v. Miller Brewing Co., 434 S.W.2d at 240 .

2009See Prince v. Miller Brewing Co., 434 S.W.2d at 240 .

2008See Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc. , 948 S.W.2d 293, 298 (Tex. 1997) (holding that a liquidated damages clause in a contract will not be enforceable unless it represents a reasonable estimate of anticipated damages upon breach of the contract).

2008See Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 298 (Tex. 1997) (holding that a liquidated damages clause in a contract will not be enforceable unless it represents a reasonable estimate of anticipated damages upon breach of the contract).

2003In a breach of contract action for failure to transfer shares of a closely held corporation, “[t]he proper measure of damages is the fair market value of the stock . . . .” See Bowers Steel, Inc. v. DeBrooke , 557 S.W.2d 369, 373 (Tex. Civ .

2003Having breached the contract, appellants cannot then enforce the Termination provision as though it were a liquidated damages clause or the common-law measure of damages, which it is not, In a breach of contract action for failure to transfer shares of a closely held corporation, “[t]he proper measure of damages is the fair market value of the stock.... ” See Bowers Steel, Inc. v. DeBrooke, 557 S.W.2d 369, 373 (Tex.Civ.App.-San Antonio 1977, no writ) (employee was promised 20% of stock in closely held corporation, but never received it); see also Miga v. Jensen, 96 S.W.3d 207, 215 (Tex. 2003)

2018With respect to reselling the condominium units post-breach, Borlenghi testified, “We made a decision [about lowering the listing price for Unit 702] considering the market, the demand that was not there, the fact that economic—that economic situation has changed in Houston, and the fact that if we want to sell them, we must sell [the units] as quickly as possible . . . [b]ecause they cost too much to keep.” This evidence of the uncertainty of the real estate market suffices to meet the “difficulty of estimation” prong of the liquidated-damages test.4 See FPL Energy, 426 S.W.3d at 70 ; see als

2015To the extent that §356 could be interpreted to only permit unreasonableness to be measured retrospectively in comparison to actual damages, it is contrary to Texas law, and as such unpersuasive. 11 Contrast to Phillips, 820 S.W.2d at 788 (party challenging reasonableness of liquidated damages clause as grossly disproportionate to actual damages assumes burden to show actual damages); cf. FPL Energy, 426 S.W.3d at 71-72 (although clauses in question reasonably forecast damages “on their face,” still unenforceable because not reasonable in comparison to actual damages eventually sustained). 14

2015Quasi-estoppel is appropriate where "it would to provide more than a "scintilla" of evidence to support be unconscionable to allow a person to maintain a position the conclusion that there is a genuine issue of material fact inconsistent with one to which he acquiesced, or from for trial). which he accepted a benefit." Lopez v. Munoz, Hockema The district court also held that the $ 100 per day & Reed, L.L.P., 22 S.W.3d 857, 864 , 43 Tex. Sup. Ct. J. provision was not a reasonable estimate of just compen- 806 (Tex. 2000) (citing Atkinson Gas Co. v. Albrecht, sation [**23] for the anticipated da

2015Quasi-estoppel is appropriate where “it would be unconscionable to allow a person to maintain a position inconsistent with one to which he acquiesced, or from which he accepted a benefit.” Lopez v. Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 864 (Tex.2000) (citing Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 240 (Tex.Ct.App.1994)).

2015No claim to original U.S. Government Works. 10 In re Dow Corning Corp., 419 F.3d 543 (2005) 45 Bankr.Ct.Dec. 46 , 2005 Fed.App. 0360P Because we conclude that Dow Corning met its burden of showing that the liquidated damages clause at issue is a penalty clause unenforceable under Texas law for reasons of public policy, we need not address whether a condition precedent to enforcement of the clause was met.

2015No claim to original U.S. Government Works. 10 In re Dow Corning Corp., 419 F.3d 543 (2005) 45 Bankr.Ct.Dec. 46 , 2005 Fed.App. 0360P Because we conclude that Dow Corning met its burden of showing that the liquidated damages clause at issue is a penalty clause unenforceable under Texas law for reasons of public policy, we need not address whether a condition precedent to enforcement of the clause was met.

2021El Centro Mall, LLC v. Payless ShoeSource, Inc., 94 Cal. Rptr. 3d 43, 46 (Cal. Ct. App. 2009); Radisson Hotels Int’l, Inc. v. Majestic Towers, Inc., 488 F. Supp. 2d 953 , 958–59 (C.D.

2021El Centro Mall, 94 Cal. Rptr. 3d at 46–47.