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Illinois Compiled Statutes

810 ILCS 5/2A-504 (2026)

Liquidation of damages

✓ current as of May 2026
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(810 ILCS 5/2A-504) (from Ch. 26, par. 2A-504)
    Sec. 2A-504. Liquidation of damages.
    (1) Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor's residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission.
    (2) If the lease agreement provides for liquidation of damages, and such provision does not comply with subsection (1), or such provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this Article.
    (3) If the lessor justifiably withholds or stops delivery of goods because of the lessee's default or insolvency (Section 2A-525 or 2A-526), the lessee is entitled to restitution of any amount by which the sum of his or her payments exceeds:
        (a) the amount to which the lessor is entitled by
    
virtue of terms liquidating the lessor's damages in accordance with subsection (1); or
        (b) in the absence of those terms, 20% of the then
    
present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or $500.
    (4) A lessee's right to restitution under subsection (3) is subject to offset to the extent the lessor establishes:
        (a) a right to recover damages under the provisions
    
of this Article other than subsection (1); and
        (b) the amount or value of any benefits received by
    
the lessee directly or indirectly by reason of the lease contract.
(Source: P.A. 87-493.)

    
Notes of Decisions
Cited in 4 cases, 1997–2003 · leading case: In Re: Montgomery Ward Holding Corp., a Delaware Corp., Reorganized Debtors Montgomery Ward & Co., Inc. v. Meridian Leasing Corp., 326 F.3d 383 (3rd Cir. 2003).
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In Re: Montgomery Ward Holding Corp., a Delaware Corp., Reorganized Debtors Montgomery Ward & Co., Inc. v. Meridian Leasing Corp., 326 F.3d 383 (3rd Cir. 2003). “(1) Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor’s residual interest, may be liquidated in the lease agreement but only at an amount or by a formula…”
Wiskup v. Liberty Buick Co., Inc., 953 F. Supp. 958 (N.D. Ill. 1997). “In particular, plaintiff argues that these policies violate 810 ILCS 5/2A-504(l), which requires that liquidated damages in lease contracts be “reasonable in light of the then anticipated harm caused by the default or other act or omission.”
Montgomery Ward & Co. v. Meridian Leasing Corp. (In Re Montgomery Ward Holding Corp.), 269 B.R. 1 (D. Del. 2001). “810 ILCS 5/2A-504(l) (emphasis added). To determine under Illinois law whether a liquidated damages provision is reasonable or is unenforceable as a penalty, the court must examine whether the provision appears to have been designed to secure a party’s performance or whether it…”
In Re: Montgomery (3rd Cir. 2003). “”) § 2A-504 (enacted as 810 ILCS 5/2A-504): Liquidation of damages.”
— 810 ILCS 5/2A-504(l) — 2 cases
Wiskup v. Liberty Buick Co., Inc., 953 F. Supp. 958 (N.D. Ill. 1997). “In particular, plaintiff argues that these policies violate 810 ILCS 5/2A-504(l), which requires that liquidated damages in lease contracts be “reasonable in light of the then anticipated harm caused by the default or other act or omission.”
Montgomery Ward & Co. v. Meridian Leasing Corp. (In Re Montgomery Ward Holding Corp.), 269 B.R. 1 (D. Del. 2001). “810 ILCS 5/2A-504(l) (emphasis added). To determine under Illinois law whether a liquidated damages provision is reasonable or is unenforceable as a penalty, the court must examine whether the provision appears to have been designed to secure a party’s performance or whether it…”
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