Whether an early termination fee is an enforceable liquidation of damages or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances. A liquidated damages clause is enforceable if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation. The burden is on the party seeking to avoid liquidated damages to show that the stated damages are, in fact, a penalty. This burden is met with evidence establishing that actual damages were readily ascertainable at the time the contract was entered into or that the liquidated damages are conspicuously disproportionate to foreseeable or probable losses.
Pool Doctor Mgt. Serv., Inc. v. Board of Mgrs. of the Meadowlands Estates Condominium, Inc., NY Slip Op 02800 (2d Dep't May 24, 2023)
