459, 1976), our highest court, in a case of first impression, was called on to determine the
enforceability of a provision in a commercial sales contract which 1) stipulated that the
seller may recover the reasonable value of attorney's fees incurred as a result of the
buyer's breach and 2) attempted to liquate such sum at 30% of the amount recoverable by
the plaintiff in the event that the buyer failed to make payments due under the contract
which required the services of an attorney for collection.
The Court ruled that attorney's fees were not recoverable as damages in an action for
breach of contract under the UCC or otherwise at law, unless expressly agreed to by the
parties. The Court, in its analysis of the UCC, called to attention of all parties that the
code itself allows the parties broad discretion to fashion their own remedies for breach of
contract but continue to contain express limitations on the ability of the parties to alter
the damages rules.
The UCC provisions, namely §2-302 (unconscionability) and
§2-718 (liquidated damages clause) were analyzed by the Court. The majority stated
that "[o]ur courts have, in the past, refused to enforce a liquidated damages provision
which fixed damages grossly disproportionate to the harm actually sustained, or likely to
be sustained, by the non-breaching party (14 N.Y.Jur., Damages, s 162; see e.g.,
Wirth & Hamid Fair Booking v. Wirth, 265 NY 214, 192 N.E. 297;
Seidlitz v. Auerbach, 230 [*18]NY 167, 129 N.E.
461; Weinstein & Sons v. City of New York, 264 App. Div. 398, 399, 35
N.Y.S.2d 530, 531, affd. 289 NY 741, 46 N.E.2d 351; Parker v. Dairy-men's
League Co-operative Assn., 222 App.Div. 341, 346, 226 N.Y.S. 226, 232).
In Wirth & Hamid Fair Booking (supra, 265 NY p. 223, 192