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This entry was published on 2014-09-22
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Liquidation of Damages
Uniform Commercial Code (UCC) CHAPTER 38, ARTICLE 2-A, PART 5
Section 2-A-504. Liquidation of Damages.

(1) Damages payable by either party for default, or any other act or
omission, including indemnity for loss or diminution of anticipated tax
benefits or loss or damage to lessor's residual interest, may be
liquidated in the lease agreement but only at an amount or by a formula
that is reasonable in light of the then anticipated harm caused by the
default or other act or omission.

(2) If the lease agreement provides for liquidation of damages, and
such provision does not comply with subsection (1), or such provision is
an exclusive or limited remedy that circumstances cause to fail of its
essential purpose, remedy may be had as provided in this Article.

(3) If the lessor justifiably withholds or stops delivery of goods
because of the lessee's default or insolvency (Section 2-A-525 or
2-A-526), the lessee is entitled to restitution of any amount by which
the sum of his or her payment exceeds:

(a) the amount to which the lessor is entitled by virtue of terms

liquidating the lessor's damages in accordance with

subsection (1); or

(b) in the absence of those terms, 20 percent of the then present

value of the total rent the lessee was obligated to pay for

the balance of the lease term, or, in the case of a consumer

lease, the lesser of such amount or $500.

(4) A lessee's right to restitution under subsection (3) is subject to
offset to the extent the lessor establishes:

(a) a right to recover damages under the provisions of this

Article other than subsection (1); and

(b) the amount or value of any benefits received by the lessee

directly or indirectly by reason of the lease contract.