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Lake River Corporation, Plaintiff-Appellee-Cross-Appellant v. Carborundum Company, Defendant-Appellant-Cross-Appellee Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: A contract’s minimum-quantity guarantee was deemed an unenforceable penalty, not valid liquidated damages, because it awarded the full contract price for undelivered goods without deducting saved costs. An asserted lien was also invalidated.
Legal Significance: This case illustrates the stringent test for liquidated damages under Illinois law, emphasizing that clauses grossly disproportionate to actual or probable damages, particularly by ignoring saved costs, constitute unenforceable penalties.
Lake River Corporation, Plaintiff-Appellee-Cross-Appellant v. Carborundum Company, Defendant-Appellant-Cross-Appellee Law School Study Guide
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Case Facts & Court Holding
Key Facts & Case Background
Lake River Corporation contracted to provide bagging and distribution services for Carborundum Company’s product, Ferro Carbo. Carborundum insisted Lake River install a new $89,000 bagging system. To ensure recovery of this cost and a 20% profit, the contract included a minimum-quantity guarantee: Carborundum would ship 22,500 tons over three years. If this minimum was not met, Lake River would invoice Carborundum “at the then prevailing rates for the difference between the quantity bagged and the minimum guaranteed.” Due to a steel market downturn, Carborundum shipped only 12,000 tons. Lake River subsequently billed Carborundum $241,000 for the 10,500-ton shortfall. This sum represented the full contract price for the unshipped amount, effectively giving Lake River its expected revenue without incurring the variable costs of bagging the shortfall. When Carborundum refused to pay, arguing the clause was a penalty, Lake River impounded 500 tons of Carborundum’s bagged Ferro Carbo already in its warehouse, claiming a lien, despite Carborundum having paid for all services performed on those specific impounded goods.
Court Holding & Legal Precedent
Issue: Is a minimum-quantity guarantee clause in a services contract, which requires the breaching party to pay the full contract price for the guaranteed minimum quantity not taken, less amounts already paid for services performed, an enforceable liquidated damages provision or an unenforceable penalty under Illinois law when it fails to account for the non-breaching party’s costs saved by non-performance?
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IRAC Legal Analysis
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Legal Issue
Is a minimum-quantity guarantee clause in a services contract, which requires the breaching party to pay the full contract price for the guaranteed minimum quantity not taken, less amounts already paid for services performed, an enforceable liquidated damages provision or an unenforceable penalty under Illinois law when it fails to account for the non-breaching party’s costs saved by non-performance?
Conclusion
This case serves as a strong precedent under Illinois law that liquidated Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupi
Legal Rule
Under Illinois law, a liquidated damages provision is enforceable only if: (1) Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore
Legal Analysis
The court, applying Illinois law, scrutinized the minimum-guarantee clause and found it Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in
Flash-to-Full Case Opinions
Flash Summary
- A liquidated damages clause is an unenforceable penalty if it fails