Wednesday, December 25, 2013

Lake River Corp. v. Carborundum Co. case brief

Lake River Corp. v. Carborundum Co. case brief summary
769 F.2d 1284 (1985)

Defendant appealed and plaintiff cross-appealed from decision of the United States District Court for the Northern District of Illinois, Eastern Division, which gave judgment for both parties in case brought by plaintiff for liquidated damages, contending assertion of lien on bagged product that it refused to ship to defendant's customers.

Plaintiff brought suit following demand of contract payment and defendant's refusal, and claimed liquidated damages. Defendant counterclaimed for value of bagged product, subject of contract, when plaintiff impounded it and additional cost of serving customers affected by impounding.


  • On appeal, court held that it was apparent from face of contract that damages provided for by "liquidated damages" clause were grossly disproportionate to any probable loss and penalized some breaches much more heavily that others regardless of relative cost. 
  • However, fact that damage formula was invalid did not deprive plaintiff of remedy; the victim of breach was entitled to common law damages, which, in this case, was unpaid contract price minus costs that plaintiff saved by not having to complete contract. 
  • The court held that damages on counterclaim had to be refigured as well, as defendant made no effort to prove loss in form of reduced profits.
Affirmed in part, reversed in part, and remanded, on grounds that parties' damages were to be redetermined in accordance with opinion; plaintiff was entitled to common law damages for breach of contract, and defendant's damages had to be refigured, as defendant made no effort to prove reduced profits.

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