Allen v. Kingdon ( 1986 )

ZIMMERMAN, Justice

(concurring):

I join the majority in its disposition of the various issues. However, the majority quotes from Warner v. Rasmussen, 704 P.2d 559 (Utah 1985), to the effect that contractual provisions for liquidated damages will be enforced unless “the amount of liquidated damages bears no reasonable relationship to the actual damage or is so grossly excessive as to be entirely disproportionate to any loss that might have been contemplated that it shocks the conscience.” The Court then finds that the amount of the liquidated damages provided for in the agreement is “excessive and disproportionate” when compared to the actual loss suffered by the sellers, thus implying that in the absence of a disparity as great as that which exists here (actual loss is approximately one-third of the penalty), the standard of Warner v. Rasmussen will not be satisfied.

I think an examination of our cases should suggest to any thoughtful reader that, in application, the test stated in Warner is not nearly as accepting of liquidated damage provisions as the quoted language would suggest. In fact, I believe this Court routinely applies the alternative test of Warner — that the liquidated damages must bear some reasonable relationship to the actual damages — and that we carefully scrutinize liquidated damage awards. I think it necessary to say this lest the bar be misled by the rather loose language of Warner and its predecessors.