Truck Rent-A-Center, Inc. v. Puritan Farms

2nd, INC. 361 N.E.2d 1015 (1977)

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Nature of the Case

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Facts

Puritan (D) furnished milk products to customers through home delivery. D leased a fleet of 25 new trucks from Truck Rent-A-Center (P) for a term of seven years commencing in January 15, 1970. P was to supply the trucks and make all necessary repairs. D was to pay a weekly rental fee. P would finance the trucks through a bank and pay prime rate plus 2%. The rental charges on the trucks were to be adjusted in the event of a fluctuation in the interest rates above or below specified levels. D had a right to purchase the trucks after 12 months by paying D the amount due and owing on the bank loan plus an additional $100 per truck purchased. Article 16 in the deal called for damages to be paid to P in the event that D terminated the agreement before its stated end date. If D terminated, it would have to pay 50% of all the remaining lease payments. The contract stated that the parties have considered the substantial investment and the uncertainty in releasing as reasons for the liquidated damages clause. This liquidated damages clause was contained in the body of a printed form contract that was modified for the purposes of this lease. Three years after the lease was entered into, D wanted to terminate. D complained that P had not maintained the trucks as provided in the lease agreement, that P had notified D of these problems over a number of times, and D had not acted to cure the problems. At the time of termination, D owed $45,134.17 on the outstanding bank loan. P sued D for liquidated damages. P had difficulty in getting rid of the trucks as the milk delivery business was on the decline and only a few of the trucks were sold to other industries. D presented proof at trial that P had not repaired the trucks promptly or satisfactorily. The trial court found that P had performed its obligations under the lease and that D was not justified in terminating the contract. The court held that the liquidated damages clause was reasonable and represented a fair estimate of the actual damages which would be difficult to ascertain properly. The court then determined that P would be entitled to $177,355.20 in rent for the remainder of the lease and gave P the verdict for $88,677.60. This was affirmed by the Appellate Division. D appealed.