14 Conn. App. 481 | Conn. App. Ct. | 1988
This is the defendant’s appeal from a judgment rendered in the plaintiff’s favor in an action concerning a computer program licensing agreement. The case was tried to the court on a written stipulation of facts, of which the following are relevant to disposition of this appeal. On March 14,1984, the plaintiff installed a computer program, Sydoc, in the defendant’s office. In late April of 1984, the defendant licensee
The agreement also established a sixty day acceptance period during which the defendant could terminate the license without financial obligation. The acceptance period was defined as commencing on the date of installation. In the event of termination, a licensee was required “promptly [to] certify to [the plaintiff] in writing that [the] licensee has permanently eliminated the product from its computers, tapes, disks or any other data storage media and that licensee has ceased the use of the product.” The license agreement consisted of standardized language contained in the plaintiff’s preprinted forms.
On May 31,1984, the plaintiff sent the defendant an invoice for $4300. On June 26, 1984, the defendant informed' the plaintiff by letter that it was terminating the agreement and certified that it would permanently eliminate the plaintiff’s program from its computer storage media.
Shortly after receipt of this letter, the plaintiff informed the defendant that the letter was not being accepted as a termination of the license agreement. On
On October 9, 1985, the plaintiff commenced this action claiming to have accelerated the payment of the entire $16,900 due under the contract because of the defendant’s alleged default. Such acceleration was allowed under the contract, upon termination of the agreement by the plaintiff. The plaintiff never terminated the contract, however, but instead treated it as ongoing and billed the defendant for payments as they came due. The case was tried on a six count amended complaint containing a prayer for relief seeking “specific performance of the License Agreement and License Schedule.”
The trial court found “that the plaintiff is properly entitled to the entire amount due, plus attorney’s fees in the amount of $2609.50 and costs.”
The defendant appeals claiming that the court erred (1) in ruling that the plaintiff was entitled to accelerate the fees due for the full term of the license agreement, (2) in ruling that time was of the essence in connection with the cancellation set forth in paragraph
We first note that by bringing an equitable action for specific performance the plaintiff brings all principles of equity into consideration, not merely those raised by the parties. See 27 Am. Jur. 2d, Equity §§ 103,105, and cases cited therein. The licensing agreement provided that its validity, construction and interpretation would be governed by the laws of the state of New York. This does not interfere with the application of equitable principles, however, because § 1-103 of the New York Uniform Commercial Code expressly provides: “Unless displaced by particular provisions of this title, the principles of law and . . . equity supplement its provisions.” (Emphasis added.)
Although the defendant was in possession of the computer program materials for only a small fraction of one year, the plaintiff seeks to recover payments for all three years of the agreement, notwithstanding the
It is readily apparent that requiring the defendant to pay three years license fees for a program which, by stipulation, was used only once and then returned, would result in an unconscionable windfall for the plaintiff. The situation is analogous to litigation concerning liquidated damage clauses which purport to allow one party to retain a disproportionately large deposit following a contract breach. New York courts have long refused to enforce liquidated damage clauses when to do so would allow a seller to be unjustly enriched by retaining, as damages, money vastly exceeding the loss suffered. See Truck Rent-A-Center, Inc. v. Puritan, 41 N.Y.2d 420, 426-27, 361 N.E.2d 1015, 393 N.Y.S.2d 365 (1977); 36 N.Y. Jur. 2d, Damages § 154 et seq. In the present case, however, the trial court did not address the matter of whether the liquidated damages clause in the contract in question was “so exorbitant as to be in the nature of a penalty.” P.J. Carlin Construction Co. v. New York, 59 App. Div. 2d 847, 848, 399 N.Y.S.2d 13 (1977). We determine that this issue is dispositive of the appeal, and find that the clause in question did create a penalty upon breach, and as such was unenforceable. Truck Rent-A-Center, Inc. v. Puritan, supra.
“Generally, where a contract contains a liquidated damage's clause, the party seeking to repudiate that clause must show that the agreed damage is so exorbitant as to be in the nature of penalty.” P.J. Carlin Construction Co. v. New York, supra. The defendant has sustained its burden of proof by showing, inter alia, that it retained the program for only two months, was allowed only ten days after the plaintiffs approval of the license agreement in which to cancel without obligation, and had used the program only once. Under
In this opinion the other judges concurred.
The defendant’s letter of June 26,1984, incorporated into the parties’ stipulation of facts, read as follows:
“Mr. Jeffrey Michals SYNCSORTINC.
560 Sylvan Avenue Englewood Cliffs, NJ 07632 Dear Jeff:
At this time I have to inform you that INDATA will terminate its’ initial license agreement for your product ‘SYDOC’. I understand that we have
Since we have had your product installed, we have used it only once. I can not justify the expense of this product when our usage is so low.
In agreement with your termination policy, I wil scratch all ‘SYDOC’ libraries and return all manuals and tapes.
Sincerely,
John J. Waranis”
The plaintiff indicated at oral argument that although the prayer for relief also requested money damages, the primary interest of the plaintiff was in specific performance.
The court found the individual defendant, president of the defendant corporation, was acting as agent for a disclosed principal and was therefore not liable to the plaintiff.
The New York statute is identical to Connecticut General Statutes § 42a-1-103.
See footnote 1, supra.
We further note that the plaintiff’s claim for money damages under the liquidated damages clause would also fail, as the defendants have met their