Liquidated (specific amount of) damages for breach of exclusivity clause . . . upheld

In Raven Capital Mgt. LLC v. Georgia Film Fund 72, LLC, 2021 NY Slip Op. 30393(U) [Case Index # 652463/2020], the court upheld the liquidated damages clause (termination fee) in the parties’ contract (which was a Term Sheet that required only that the business intermediary and the potential buyer subsequently negotiate in good faith to enter into a subsequent contract that would contains all the required details necessary for a fully binding contract). The contract contained a break-up fee if a party breached its “exclusivity” obligation. When that party breached the exclusivity obligation in the contract, the other party sued for full damages rather than the specific amount of the break-up fee (which, in legal parlance known as “liquidated damages”).

The court held that the break-up fee clause is a liquidated damages clause which prohibits actual or additional damages, even if such clause does not explicitly limit the parties’ damages liability and even if such clause does not state that it is the “exclusive remedy” for a party’s breach of contract. Thus, the court agreed with the party who argued that the break-up fee (liquidated damages clause) limits amount of damages that may be recovered, regardless of the amount of actual damages incurred by the party’s breach of contract.