WPI 303.07 Contract—Liquidated Damages

Use this instruction when the court has determined that there is an applicable, enforceable liquidated damage clause. Use the bracketed phrase, with elaboration if necessary, if the clause is applicable to a particular breach and more than one breach is at issue.

Liquidated damage clauses are favored in Washington and will be upheld if the amounts involved do not amount to a penalty or are not otherwise unlawful. Watson v. Ingram, 124 Wn.2d 845, 850, 881 P.2d 247 (1994); Buchanan v. Kettner, 97 Wn.App. 370, 984 P.2d 1047 (1999).

A liquidated damage clause is enforceable as long as it is a “reasonable forecast of just compensation” and the proof of loss will be impossible or very difficult. Watson, 124 Wn.2d at 850; Lee v. Bergesen, 58 Wn.2d 462, 464, 364 P.2d 18 (1961). A liquidated damage clause that does not meet these tests will be found to be unenforceable as a penalty for breach. See Restatement (Second) of Contracts § 356 (1981).

The reasonableness of the loss is measured against what could have been anticipated at the time of the making of the contract, rather than as against the actual loss. Restatement (Second) of Contracts, § 356 cmt. b (1981). The greater the difficulty in anticipating the amount of loss at the time the contract is made, the greater the range which will be judged to be “reasonable” as of that time. Watson, 124 Wn.2d at 853.

For a detailed discussion of damages issues, see DeWolf, Allen, & Caruso, 25 Washington Practice, Contract Law and Practice ch. 14 (3d ed.).