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Kent State Univ. v. Ford - 2015-Ohio-41, 26 N.E.3d 868 (Ct. App.)

Rule:

The Supreme Court of Ohio set forth the test for determining whether a liquidated damages provision should be upheld: Where the parties have agreed on the amount of damages, ascertained by estimation and adjustment, and have expressed this agreement in clear and unambiguous terms, the amount so fixed should be treated as liquidated damages and not as a penalty, if the damages would be: (1) uncertain as to amount and difficult of proof; and if (2) the contract as a whole is not so manifestly unconscionable, unreasonable, and disproportionate in amount as to justify the conclusion that it does not express the true intention of the parties; and if (3) the contract is consistent with the conclusion that it was the intention of the parties that damages in the amount stated should follow the breach thereof.

Facts:

Kent State University filed a Complaint against Defendant Gene A. Ford and Bradley University, asserting that Ford, the former head coach of the men's basketball team at Kent State, breached his contract by terminating his employment with Kent State four years before the contract's expiration and commencing employment with Bradley University. Count One raised a claim for Breach of Contract, based on Ford's unilateral termination of the agreement. Count Two claimed Breach of Fiduciary Duty, based on alleged duties owed by Ford to Kent State. Count Three raised a claim for Tortious Interference with a Contract against Bradley University, for inducing Ford to breach his employment contract. Ford appealed from the judgments of the Portage County Court of Common Pleas, granting summary judgment in favor of Kent State, on its claim for breach of contract, and awarding damages against Ford in the amount of $1.2 million. 

Issue:

Is a contract with a liquidated damages clause enforceable when it requires a breaching university coach to pay his salary for each year remaining under the contract, when there is limited evidence of actual damages?

Answer:

Yes

Conclusion:

The Court of Appeals of Ohio held that summary judgment was properly granted as the liquidated damages clause, which required the coach to pay his salary for each year remaining under the contract, was enforceable and was not a penalty. The liquidated damages clause withstood challenge because the damages were difficult to determine, the contract provision was not unconscionable or unreasonable in amount, and the contract was consistent with the parties' intentions following a breach.

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