Connecticut enjoys a long history of judicial consideration of liquidated damages clauses, dating back to the 1817 case of Riley v. Hartford Ins. Co., where the Connecticut Supreme Court stated that "....it is in the nature of liquidated damages, to prevent the necessity of proving them....".2 While Connecticut courts have differed as to the parity between the construction of residential real estate purchase contracts and commercial real estate purchase contracts generally,3 it appears that liquidated damages clauses in the context of real estate purchase contracts, whether residential or commercial, are treated the same under basic principles of contract law, drawing heavily upon cases that do not concern real estate. In Hanson Development Co. v. East Great Plains Shopping Center, Inc.,4 a case concerning the purchase of commercial real estate, for example, the Connecticut Supreme Court cited to an employment contract case,5 a sale of goods contract case,6 and others, as did the Connecticut Supreme Court in HH East Parcel, LLC v. Handy and Harman, Inc.,7 a commercial real estate purchase contract case. Chandlery at Essex, Inc. v. Schonberger,8 a commercial real estate purchase contract case in the Connecticut Superior Court, heavily cited Vines v. Orchard Hills, Inc.,9 a Connecticut Supreme Court case concerning a residential real estate purchase contract. Similarly, residential real estate purchase cases such as Peterson v. McAndrew10 and Echevarria v. Proto11 relied upon Norwalk Door Closer Co. v. Eagle Lock & Screw Co.,12 a case concerning a contract for the sale of goods. As such, this article necessarily considers cases concerning liquidated damages clauses with respect to residential real estate purchase contracts.
- May the seller choose specific performance instead of liquidated damages (so that liquidated damages are not an exclusive remedy)?
Connecticut courts have not directly addressed the question of whether a seller may choose specific performance instead of liquidated damages, thereby disrupting the exclusivity of liquidated damages as a remedy. The answer, therefore, must be gleaned from several relevant holdings. For example, in Hanson, the issue of whether the seller could have chosen specific performance instead of liquidated damages was only peripheral; the Court focused its discourse with respect to liquidated damages as to whether intent existed between the parties to liquidate damages when contracting for the relevant property13. The seller argued that the trial court abused its discretion in denying the seller its request to amend its counterclaim to seek specific performance in addition to actual damages.14 The Court, having found a valid liquidated damages clause, concluded that the seller could not seek actual damages.15 The Court then found that the trial court did not abuse its discretion in refusing to allow amendment of the complaint to add the remedy of specific performance because "[t]here is nothing in the record to indicate why the additional relief was not requested when the counterclaim was first filed. More than eight years passed from the time the complaint was filed to the time when the seller sought to amend its counterclaim and the date set for retrial was rapidly approaching."16 The Court did not consider the question of whether the seller could otherwise have sought specific performance instead of liquidated damages, if not for the seller's untimeliness. In other words, while the Court emphatically noted that the seller was precluded from seeking actual damages because of the valid liquidated damages clause, it did not make the same point vis-à-vis specific performance.
Some further clarity is provided by the Connecticut Superior Court in Willert v. Russo,17 which concerns a purchaser's breach of a residential real estate purchase contract where the seller sought both consequential damages and specific performance.18 Here, the Court rejected the seller's arguments for consequential damages and for specific performance because the language of the contract unambiguously provided for liquidated damages as the seller's sole remedy.19 The operative language in the contract was as follows:
If the Buyer fails to perform the provisions hereof, the Seller may deem this Agreement to be at an end, in which event the deposit made by the Buyer hereunder shall be forfeited by the Buyer and retained by the Seller as liquidated damages for Buyers' breach hereof.20
The court did not analyze whether, upon principle, the seller could have chosen specific performance if not for the unambiguous contract language when it held:
The seller's remedy is limited to the liquidated damages as provided in the Contract. It is well established that a vendor may not retain a stipulated sum as liquidated damages and also recover actual damages. Having contracted to accept liquidated damages upon the buyers' breach, he cannot seek further monetary damages nor is he entitled to specific performance.21
1. This article is for informational purposes only and is not intended to be and should not be taken as legal advice. In addition, this article is the statement by the authors only and does not necessarily reflect the views of Shipman & Goodwin LLP, any of its other attorneys, or its clients. The authors are grateful to Jessica Colin-Greene for her research assistance.
2. Conn. 368, 372 (1817).
3. See, e.g., Enfield Retail Properties, LLC v. Camel Fitness, Inc., 2016 WL 3003143, at *9 (Conn. Super. Ct. May 16, 2016) (considering "subtle nuance" in case law regarding a lessee's breach of lease for commercial real estate in the liquidated damages context); Holeva v. M & Z Assocs., Inc., 1998 WL 956359, at *5 (Conn. Super. Ct. Nov. 9, 1998) (acknowledging a split among superior courts with regard to whether the Connecticut Unfair Trade Practices Act is "applicable to a single transaction involving real estate" in the same way as it is applicable to commercial real estate transactions).
4. 195 Conn. 60 (1985).
5. See Berger v. Shanahan, 142 Conn. 726 (1955).
6. See Norwalk Door Closer Co. v. Eagle Lock & Screw Co., 153 Conn. 681 (1966).
7. 287 Conn. 189 (2008).
8. 2010 WL 2926212 (Conn. Super. Ct. June 3, 2010), at *1.
9. 181 Conn. 501 (1980).
10. 160 Conn. App. 180 (2015).
11. 2008 WL 4416039, at *1 (Conn. Super. Ct. Sept. 15, 2008).
12. 153 Conn. 681 (1966).
13. 195 Conn. at 64-65.
14. Id. at 63.
15. Id. at 66.
16. Id. at 67.
17. 2009 WL 1532376, at *1 (Conn. Super. Ct. May 4, 2009).
18. Id. at *3.
19. Id. at *4.
20. Id. at *3.
21. Id. at *5 (internal citation omitted; emphasis added).
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Originally Published by American Law Institute Continued Legal Education
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