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Vernitron Corp. v. CF 48 Associates – Case Brief Summary (New York)

In Vernitron Corp. v. CF 48 Associates, 104 A.D.2d 409 (2d Dept. 1984), the appellate court was called upon to decide whether the liquidated damages provision in a commercial lease was enforceable.

The court stated that a contractual provision fixing damages in the event of a breach will be sustained if the amount of liquidated damages bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation.

In determining whether the provision constitutes liquidated damages or a penalty, the lease must be interpreted as of the date of its execution. Any reasonable doubt as to whether a provision constitutes an unenforceable penalty or a legitimate liquidated damages clause should be resolved on the side of unenforceability.