Cleaning up Lake River

Goldberg, Victor P.

A casebook favorite for exploring the liquidated damage-penalty clause distinction is Lake River v. Carborundum in which a minimum quantity clause was found to be a penalty clause. In this paper I argue that the case was framed improperly. The contract was for the provision of a service—setting aside capacity—which was valuable to the buyer and costly to provide for the seller. The primary purpose of the minimum quantity clause was the pricing of that service. The case raises a significant damages issue: if there is an anticipatory repudiation of a contract that is take-or-pay or has a stipulated damage clause, should the promisee's ability to mitigate be taken into account when reckoning damages.



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Published Here
January 5, 2011


Virginia Law & Business Review, vol. 3, no. 2 (2008), pp. 427-445.