Dawson, pp. 141-144: Comment: Applying Damage Clauses




1.     The evidence of the $50,000 earnings is relevant on the issue of the validity of the damages clause insofar as it shows that (1) it is not difficult to prove loss in the case of breach, and (2) the fixed damages may be disproportionate to the actual harm suffered in the case where the dismissed employee takes another job, i.e. the losses here are $25,000 but three times as much would be awarded if the clause is enforced.

2.     I believe that one way or another the employee will only recover $25,000 from the employer because either the clause will be found to be unenforceable, or that the $50,000 earnings will mitigate the employee’s loss.

3.     If the second employer had paid out $150,000, there would have been no actual losses, so whether or not the clause is enforceable, I believe the employee would recover only nominal damages.


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