AB 687, as introduced, Wilk. Contracts: liquidated damages.
Existing law establishes the general presumption that a contractual provision liquidating the damages for the breach of a contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made. Existing law excepts from the presumption certain contracts, including those for damages that are to be recovered from a party to a lease of a dwelling.
This bill would provide that if parties to a pending action stipulate for settlement of an action, as specified, a provision of the stipulation liquidating damages for breach of the stipulation is valid unless the party seeking to invalidate the liquidated damages provision establishes that the amount of liquidated damages exceeds the damages, interest, recoverable costs, and reasonable attorney’s fees sought in the action.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 1671 of the Civil Code is amended to
2read:
(a) This section does not apply in any case where another
2statute expressly applicable to the contract prescribes the rules or
3standard for determining the validity of a provision in the contract
4liquidating the damages for the breach of the contract.
5(b) Except as provided in subdivision (c), a provision in a
6contract liquidating the damages for the breach of the contract is
7valid unless the party seeking to invalidate the provision establishes
8that the provision was unreasonable under the circumstances
9existing at the time the contract was made.
10(c) The validity of a liquidated damages provision shall be
11determined under subdivision (d) and not under
subdivision (b)
12where the liquidated damages are sought to be recovered from
13either:
14(1) A party to a contract for the retail purchase, or rental, by
15such party of personal property or services, primarily for the party’s
16personal, family, or household purposes; or
17(2) A party to a lease of real property for use as a dwelling by
18the party or those dependent upon the party for support.
19(d) In the cases described in subdivision (c), a provision in a
20contract liquidating damages for the breach of the contract is void
21except that the parties to such a contract may agree therein upon
22an amount which shall be presumed to be the amount of damage
23sustained by a breach thereof, when, from the nature of the case,
24it would be impracticable or extremely difficult to fix the actual
25damage.
26(e) Notwithstanding subdivisions (c) and (d), if parties to a
27pending action stipulate for settlement of an action, either in a
28signed writing outside the court’s presence or orally before the
29court, a provision of the stipulation liquidating damages for breach
30of the stipulation is valid unless the party seeking to invalidate the
31liquidated damages provision establishes that the amount of
32liquidated damages exceeds the damages, interest, recoverable
33costs, and reasonable attorney’s fees sought in the action.
O
99