Wirth & Hamid Fair Booking v. Wirth

In Wirth & Hamid Fair Booking v. Wirth, 265 NY 214, the High Court noted that "liquidated damages constitute the compensation which the parties have agreed must be paid in satisfaction of the loss or injury which will follow (sic) from a breach of contract. They must bear reasonable proportion to the actual loss. Otherwise, an agreement to pay a fixed sum, upon a breach of contract, is an agreement to pay a penalty, though the parties have chosen to call it liquidated damages,' and is unenforceable". UCC 2-302 of the code which articulates the principle of unconscionability provides in pertinent part: "If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause so as to avoid any unconscionable result." The principle underlying this section is the prevention of oppression and unfair surprise and not of disturbance of allocation of risk (Official Comment, McKinney's Cons. Laws of NY, Book 62 1/2 , part I, Uniform Commercial Code, s 2-302, p. 193). It should be emphasized that in contrast to subdivision (1) of 2-718 of the code discussed above, 2-302 is limited to and focuses only on the time of contracting as the vantage point for the determination of unconscionability. After a review of the evidence, the High Court concluded that "under the circumstances of this case, the provision for payment of attorney's fees does not fail on the ground of unconscionability, although in a case involving disparity of bargaining power or oppressive practices, this principle may be the basis for invalidating such a contractual term". Without sufficient evidence to make such a determination, the court remanded for those factual deficiencies.