Whether a liquidated damages provision in a contract is an unenforceable penalty is a question of law for the court. The party seeking to avoid liquidated damages has the burden to prove that they are an unenforceable penalty. If the amount is grossly disproportionate to the probable loss, the provision is a penalty, and courts will not enforce it. In the absence of any countervailing public policy concerns, freedom of contract prevails in an arm's length transaction between sophisticated parties.
Seymour v. Hovnanian, NY Slip Op 04705 (1st Dep't July 26, 2022)
