Liquidated damages enforces a remedy to which the parties agreed in the contract, provided that the agreed remedy is not unduly harsh to the defendant and does not fail to provide the plaintiff a meaningful remedy.[1] The terms of a valid liquidated damages clause supersede any default award of expectation/compensatory damages.
“Liquidated damages have been defined as the sum which a party to a contract agrees to pay if he/she breaks some promise and which, having been arrived at by a good faith effort to estimate the actual damages that will probably ensue from breach, is recoverable as agreed-upon damages if breach occurs.”[2] In Nevada, liquidated damages are prima facie valid unless the party challenging the provision can prove that it amounts to a penalty.[3] In Joseph F. Sanson Inv. Co., the Supreme Court rejected the awarding of attorney fees under the liquidated damages stipulation that were fifteen times greater than the actual fees billed because this amount resulted in a penalty.[4]
Even with the various remedies available, the injured party must do whatever it can to avoid its injury. Under Avoidable Consequence Doctrine, “a party cannot recover damages for loss that he could have avoided by reasonable efforts.”[5] The breaching party has the burden of proving that the aggrieved party failed to mitigate damages.[6]
In Nevada, “disputes regarding breach of contract are questions for a jury to decide.”[7] Therefore, once the elements required for a valid contract are established, the enforceability of the breach of contract and the resulting awarding of damages are fact-specific and up to the jury.
[1] Impact Mktg. Int’l LLC, 2012 WL 359914 (citing Mason v. Fakhimi, 865 P.2d 333, 335 (1993) (Under Nevada law, liquidated damages are a good faith estimate of the damages likely to occur upon breach and which the parties agree to in their contract)).
[2] Joseph F. Sanson Inv. Co. v. 268 Ltd., 106 Nev. 429, 435, 795 P.2d 493, 496-97 (1990).
[3] See Mason v. Fakhimi, 865 P.2d 333, 335 (1993); Joseph F. Sanson Inv. Co., 106 Nev. at 435.
[4] Joseph F. Sanson Inv. Co., 106 Nev. at 435
[5] Connor v. S. Nev. Paving, Inc., 103 Nev. 353, 356, 741 P.2d 800, 801 (1987); see also Interstate Com. Bldg. Serv., Inc. v. Bank of Am. Nat’l Trust and Sav. Ass’n., 23 F.Supp.2d 1166, 1176 (D. Nev.1998) (stating that the parties have the duty to mitigate or minimize their losses flowing from a breach of contract).
[6] Connor, 103 Nev. at 355.
[7] Id.
Hon. Jay Young (Ret.) is a retired judicial officer with decades of experience presiding over complex civil litigation matters. Following a distinguished career on the bench, Judge Young now serves as a mediator, arbitrator, and court‑appointed special master, and discovery referee. Judge Young brings a disciplined, impartial, and results‑oriented approach to dispute resolution. Judge Young is based in Nevada and accepts appointments statewide and nationally, subject to agreement or court order. He can be reached at 855.777.4557 or info@armadr.com
Known for judicial temperament, analytical rigor, and practical problem‑solving, Judge Young assists litigants and counsel in resolving high‑stakes disputes efficiently and with integrity and employing best practices. He is recognized by U.S. News and World Report’s publication Best Lawyers as Arbitration Lawyer of the Year.