Wednesday, December 25, 2013

Samson Sales, Inc. v. Honeywell, Inc. case brief

Samson Sales, Inc. v. Honeywell, Inc. case brief summary
465 N.E.2d 392 (Ohio 1984)

Defendant alarm company appealed the judgment of the Court of Appeals (Ohio), which reversed the decision of the trial court and found that plaintiff customer was entitled to damages in excess of those specified in a contract for alarm service.

The customer contracted with the alarm company to have a burglar alarm installed in its pawn shop. The customer paid $ 10,500 for installation and paid a monthly fee. The contract provided for liquidated damages of $ 50. The pawn shop was burglarized and the customer brought suit for the value of the stolen merchandise, alleging that the loss resulted from the alarm company's failure to notify the police of the burglary.


  • The Supreme Court held that the Court of Appeals did not err in finding the liquidated damages clause unenforceable. 
  • The clause was not valid because it was manifestly inequitable. The fixed amount of damages was a penalty because: 
  • (1) in a multitude of conceivable situations involving the breach of the contract, the damages would be readily ascertainable, and 
  • (2) the sum of $50 was manifestly disproportionate to the consideration paid by the customer and to the possible damage that reasonably could be foreseen from the alarm company's breach of the contract. 
  • Examination and fair construction of the contract failed to evince a conscious intention of the parties to estimate the damages that might reasonably flow from the negligent breach of the agreement.
The court affirmed the judgment.

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