I was pretty surprised to find this case. As a mediator, this comes up all the time. Plaintiff will take a smaller amount in payments but wants a big penalty if the agreed upon amount is not paid. I wonder if it is different if approved by the bankruptcy court. A tip of the hat to attorney D. Brian Reider for sending me this case.
PURCELL v. SCHWEITZER, 224 Cal.App.4th 969 (2014)
Issue: Where a settlement agreement provides that in the event of a default, an additional amount is owed, can the additional amount be found to be an unenforceable penalty?
Holding: Yes. “The amount set as liquidated damages `must represent the result of a reasonable endeavor by the parties to estimate a fair average compensation for any loss that may be sustained.” Read more…
