Also known as: liquidate · liquidates · liquidated · liquidating · liquidations · liquidator · liquidators · winding-up · winding up
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
A contractual provision fixing in advance the amount of damages recoverable for breach. The amount must be reasonable in light of anticipated or actual loss and the difficulties of proof of loss. An unreasonably large amount is unenforceable as a penalty.
A contractual provision fixing in advance the amount of damages recoverable for breach. The amount must be reasonable in light of anticipated or actual loss and the difficulties of proof of loss. An unreasonably large amount is unenforceable as a penalty.
Select any source to read its text and confirm it supports the definition.
The process by which a dissolved entity converts its assets to cash, pays creditors, and distributes any remaining proceeds to owners. A dissolved corporation or partnership may carry on business only to the extent necessary to complete this process.
Select any source to read its text and confirm it supports the definition.
The process by which a dissolved entity converts its assets to cash, pays creditors, and distributes any remaining proceeds to owners. A dissolved corporation or partnership may carry on business only to the extent necessary to complete this process.
Each sense below has its own examples, sources, and questions.
Lattice Systems and Lexicon Media agree in their software licensing contract that a breach by either party will trigger payment of $75,000. When Lexicon Media fails to deliver the software, Lattice Systems proves actual losses near that figure and difficulty valuing the lost opportunity. The court enforces the clause because the amount is reasonable given the anticipated harm and proof problems.
Lighthouse Shipping contracts with Lakeshore Industries for vessel repairs and includes a clause requiring $500,000 payment for any delay. When Lakeshore Industries misses the deadline by two weeks, Lighthouse Shipping demands the full sum even though actual damages are only $40,000. The court refuses to enforce the clause because the amount is unreasonably large relative to the harm.
Logan Lane and Levi Lowe form a partnership and agree that any partner who improperly uses confidential information must pay $25,000 as liquidated damages. After Logan Lane discloses trade secrets to a competitor, the partnership enforces the clause. The court upholds the amount because it reasonably approximates the difficulty of proving loss from the breach.
A clause is enforceable only if the amount is reasonable in light of the anticipated or actual loss and the difficulties of proof of loss. An unreasonably large amount is treated as an unenforceable penalty.
Supporting sources
No. A valid liquidated damages provision does not preclude a court from ordering specific performance or an injunction if that relief would otherwise be appropriate.
Supporting sources
Lola Langley, a member of a member-managed LLC, sells LLC equipment to her own company at a below-market price while the LLC is dissolving. The remaining members sue, claiming she must account for the profit. The court holds that her duty to account for self-dealing continues through the winding-up phase.
Luke Latham, a general partner in a limited partnership, begins soliciting the partnership's clients for his new competing venture while the partnership is still winding up its affairs. The remaining partners obtain an injunction. The court enforces the duty to refrain from competition during the winding-up period.
Layla Lane's corporation dissolves but continues manufacturing new products instead of only collecting receivables and paying creditors. A shareholder sues to stop the operations. The court orders the corporation to cease all activities except those necessary to liquidate its business and affairs.
A dissolved corporation may continue only those activities appropriate to wind up and liquidate its business and affairs, including collecting assets, discharging liabilities, and distributing remaining property to shareholders.
Supporting sources
…corporation rests in court of that State); Bernheimer v. Converse , 206 U. S. 516, 533 (1907) (state courts can oversee liquidation of state-chartered corporation). I, of course, am not suggesting that Delaware's varied interests would justify its acceptance of jurisdiction over any transaction touching upon the affairs…