of Appeals of
34 N.Y.2d 470, 358 N.Y.S.2d 391, 315 N.E.2d 458.
Facts: The defendants posted a $100,000 surety bond to ensure the completion of some buildings. They were not completed on time. The plaintiff sued to collect the entire $100,000 face value of the bond. The plaintiff moved for summary judgment but was denied by the trial court. The appellate court upheld the trial verdict. The plaintiff appealed.
Issue: Did the agreement between the parties provide for a penalty or for liquidated damages?
Rule: If damages from a breach are hard to measure, a provision in the contract fixing damages for breach will be upheld if the damages are reasonable and not disproportionate to the projected harm.
Analysis: The court argues that there is no statutory authority for the city to extract such a large bond from the developers. The city did not demonstrate substantial actual damages from the delay in construction. Thus, the court concludes that the bond is a penalty for breach and is not allowed at common law.
Conclusion: The court upheld the verdicts of the trial court and appellate court.