Nature of the Case
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Facts
Diaz (P) contracted with Learjet (D) to buy a model 60 jet aircraft. The contract called for a $250,000 deposit with another $750,000 to be made on September 18, 1992, another $1,000,000 to made 180 days before the delivery date of July 30, 1993, and the balance of the purchase price to be paid upon delivery. D paid the $250,000 but made no other payments. P was purchasing the aircraft for his supervisor at Televisa. Near the end of September 1992, P was informed that his supervisor no longer wanted the aircraft. P then called D to cancel and to get his $250,000 deposit. D refused and instead sent a fax requesting payment under the contract. On October 6, 1992, D wrote P a letter indicating that if no payment was forthcoming the agreement would be terminated, and all the deposit would be retained as liquidated damages. On October 20, 1992, D terminated the contract. The contract gave D the right to terminate for failure to make progress payments when due and allowed D to retain the monies as liquidated damages. Another company called Circus bought the jet and the changes it made cost D only $1,326. D realized a profit of $1,887,464 on the jet which was larger than the profit D had originally budgeted. P sued D for a return of the deposit as it was a penalty and unreasonable. The district court granted D’s motion for summary judgment holding that the clause was reasonable. The court of appeal held that the lower court had erred and used the wrong standard in evaluating the clause and in not examining all of the necessary factors. The case was remanded to the district court for further consideration of the reasonableness of the clause. The court held that D was a lost volume seller and that its actual damages were lost profits. The court then upheld the clause again. P appealed again contending that the damages clause was unreasonably large and therefore void as a penalty.
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