Authority for the proposition that averaging is the appropriate approach may be taken from the case of English Hop Growers v Dering, 2 KB 174, CA (1928).
[4] When damages are not predetermined/assessed in advance, then the amount recoverable is said to be "at large" (to be agreed or determined by a court or tribunal in the event of breach).
[10] Contracts under common law require there to have been some attempt to create an equal or reasonably proportionate quota between the damages made and the actual loss.
Parties must not lose sight of the principal compensation and they must keep the time of execution and the difficulty of the calculations in mind when drafting the contract.
If Abbot breaches the contract by refusing to lease the store-front at the appointed time, it will be difficult to determine what profits Benson will have lost because the success of newly created small businesses is highly uncertain.
[13] In the United States, Section 2-718(1) of the Uniform Commercial Code provides that, in contracts for the sale of goods:[14] Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy.
The credit card companies did not produce evidence of their actual costs to the OFT, instead insisting their charges are in line with clear policy and information provided to customers.
In 2015, the full court overturned Justice Gordon's first instance judgment that credit card late payment fees charged by ANZ to its customers constituted penalties at law and equity (and were therefore largely unenforceable).
[17] The decision otherwise upholds Justice Gordon's findings that honour, dishonour and overlimit fees charged by ANZ were not penalties, unconscionable or unfair.
High Court Civil law systems generally impose less severe restrictions on liquidated damages.
For example, Article 1226 of the French Civil Code provides for clause pénale, a variant of liquidated damages which combines compensatory and coercive elements.
Judges may adjust excessive contract penalties, but such clauses are not generally void as a matter of French law.