Opinion ID: 886354
Heading Depth: 2
Heading Rank: 2

Heading: The State of the Law of Liquidated Damages

Text: ¶ 19 Before addressing the instant case, our review of the precedent on this issue indicates there is disparity in our case law on the enforceability of liquidated damages clauses. Further, it is apparent that reconciliation of this disparity requires that we delve into the history and development of the law of liquidated damages. To that inquiry we now turn.
¶ 20 The fundamental tenet of modern contract law is freedom of contract; parties are free to mutually agree to terms governing their private conduct as long as those terms do not conflict with public laws. See, e.g., Lewis v. B & B Pawnbrokers, Inc., 1998 MT 302, ¶ 22, 292 Mont. 82, ¶ 22, 968 P.2d 1145, ¶ 22. This tenet presumes that parties are in the best position to make decisions in their own interest. Normally, in the course of contract interpretation by a court, the court simply gives effect to the agreement between the parties in order to enforce the private law of the contract. Ophus v. Fritz, 2000 MT 251, ¶ 23, 301 Mont. 447, ¶ 23, 11 P.3d 1192, ¶ 23. When one party breaches the contract, judicial enforcement of the contract ensures the nonbreaching party receives expectancy damages, compensation equal to what that party would receive if the contract were performed. [3] See, e.g., Riverview Homes II, Ltd. v. Canton, 2001 MT 309, ¶ 24, 307 Mont. 517, ¶ 24, 38 P.3d 848, ¶ 24; Conagra, Inc. v. Nierenberg, 2000 MT 213, ¶ 69, 301 Mont. 55, ¶ 69, 7 P.3d 369, ¶ 69. See also § 27-1-311, MCA. By only awarding expectancy damages rather than additional damages intended to punish the breaching party for failure to perform the contract, court enforcement of private contracts supports the theory of efficient breach. In other words, if it is more efficient for a party to breach a contract and pay expectancy damages in order to enter a superior contract, courts will not interfere by requiring the breaching party to pay more than was due under their contract. Patton v. Mid-Continent Sys., Inc. (7th Cir.1988), 841 F.2d 742, 750. ¶ 21 Liquidated damages are, in theory, an extension of these principles. Rather than wait until the occurrence of breach, the parties to a contract are free to agree in advance on a specific damage amount to be paid upon breach. 24 RICHARD A. LORD, WILLISTON ON CONTRACTS, § 65:1 (4th ed.2002) (hereinafter WILLISTON ON CONTRACTS). This amount is intended to predetermine expectancy damages. Ideally, this predetermination is intended to make the agreement between the parties more efficient. Rather than requiring a post-breach inquiry into damages between the parties, the breaching party simply pays the nonbreaching party the stipulated amount. Further, in this way, liquidated damages clauses allow parties to estimate damages that are impractical or difficult to prove, as courts cannot enforce expectancy damages without sufficient proof. ¶ 22 However, theory clashes with reality when, after breach of the contract, one of the parties believes the liquidated damages clause is far afield from what the nonbreaching party would be entitled to under normal expectancy damages. [4] Consequently, when one of the parties seeks a judicial determination on whether the stipulated damages clause in the contract constitutes a penalty, courts are forced into a different role than simple interpretation and enforcement of the private law of the contract. Instead, the court must step in and decide whether or not it will rewrite the contract already agreed to by the parties by striking the stipulated damages clause as a penalty. [5] In so doing, the court substitutes its judgment for that of the parties when they initially entered the contract.
¶ 23 Because judicially rewriting a contract is foreign to the principle of freedom of contract and to the court's normal role of interpretation and enforcement of expectancy damages, the law of liquidated damages has a somewhat tortured history. Indeed, the disparity in Montana's case law is apparently only one of numerous examples, as the commentators on the subject note many inconsistencies. See Kenneth W. Clarkson et al., Liquidated Damages v. Penalties: Sense or Nonsense?, 1978 WIS. L.REV. 351 (hereinafter Clarkson) (The ablest judges have declared that they felt themselves embarrassed in ascertaining the principle on which the decisions [distinguishing liquidated damages from penalties] ... were founded. quoting Ruggles, J. in Cotheal v. Talmage (1854), 9 N.Y. 551); Goetz, 554 & n. 2. ¶ 24 In order to determine whether a clause should be declared a penalty, courts attempt to measure the reasonableness of a liquidated damages clause. Because the language of the clause is obviously not controlling, courts look beyond the contract to analyze reasonableness. As indicated by Montana's statute on liquidated damages, § 28-2-721, MCA, [6] and by treatises including WILLISTON ON CONTRACTS, § 65:1, and § 356 of the RESTATEMENT (SECOND) OF CONTRACTS (1965) (hereinafter RESTATEMENT § 356), the threshold indicator of reasonableness is whether the situation involves damages of a type that are impractical or extremely difficult to prove. When the parties to the contract will suffer difficult to prove damages, a court can assume there was a reasonable motive for adding a liquidated damages clause, because, as mentioned, stipulated damages can quantify damages that a court could not otherwise award for lack of proof. [7] However, because the difficulty of proof of damages does not by itself demonstrate reasonableness, courts must look further to the amount of damages. ¶ 25 According to RESTATEMENT § 356 and other treatises, damages must be reasonable in relation to the damages the parties anticipated when the contract was executed or in relation to actual damages resulting from the breach. However, these tests are of limited value for a number of reasons. First, the reasonableness of anticipated damages can be difficult to determine because, as mentioned, the parties are usually in a situation where damages are difficult to prove. Hence, the question of reasonableness becomes somewhat circular and subjective: how can one meet a burden of proof to demonstrate anticipated damages are reasonable and yet difficult and impractical to prove at the same time? While this proof may be theoretically possible, it inevitably provides fertile grounds for disagreement between the parties. ¶ 26 Second, regarding the relation between actual damages and stipulated damages, the parties are usually already before the court because one party asserts the disparity is too great in the first place. The breaching party often argues the stipulated damages should not be enforced because the nonbreaching party did not suffer any actual damages. See, e.g., O'Keefe v. Dyer (1898), 20 Mont. 477, 484-85, 52 P. 196, 199 (clause a penalty in part because no actual damages suffered). Consequently, this rule provides courts little guidance because a comparison of actual to stipulated damages is conclusory and ignores difficult to prove damages. Finally, because the language of RESTATEMENT § 356 uses or to indicate either anticipated or actual damages can be used to determine reasonableness, parties argue over which of the tests should apply to their case. For instance, if a clause was reasonable at the time of contracting but unreasonable after the fact, must it be upheld by a court as enforceable or struck as a penalty? See Larry A. DiMatteo, A Theory of Efficient Penalty: Eliminating the Law of Liquidated Damages, 38 Am. Bus. L.J. 633, 724 (2000-01) (hereinafter DiMatteo) (noting proposed liquidated damages reforms to the Uniform Commercial Code Article 2 that allow either test to satisfy reasonableness). ¶ 27 As a result of this lack of clarity, courts often inquire into the intent of the parties at the time of contracting in order to determine reasonableness. See WILLISTON ON CONTRACTS, § 65:11. Specifically, courts look to whether the parties negotiated the clause at issue and whether the parties actually attempted to estimate damages in order to determine if the bargaining process was voluntary. However, there is often a lack of evidence of specific negotiation on the liquidated damages clause. Further, form contracts with predrafted liquidated damages present a special problem under this test because there is always a lack of evidence of negotiation. Courts cannot simply strike all stipulated damages clauses in form contracts based on lack of negotiation because such contracts are widely used, the terms are often reasonable, and the contracts provide efficiencies necessary to the conduct of everyday business. Consequently, the intent test has limited usefulness as well. ¶ 28 When there is evidence of intent, courts look to whether one of the parties specifically intended to penalize the other party for breach in order to secure their performance rather than simply provide for an amount designed to properly compensate for the failure to perform. Under this rule, penalty clauses are declared in terrorem for unfairly forcing performance. See Goetz, 555. However, as WILLISTON ON CONTRACTS points out, [D]amages for breach of contract, by their nature, induce performance of contractual undertakings.... [M]erely because a liquidated damages provision induces performance of a contract does not make the clause a penalty; it is only when it induces performance illegitimately, as when the amount is disproportionately large relative to the reasonably anticipated probable damages (or in some jurisdictions, relative to the actual damages suffered) so that performance is coerced by making breach unreasonably costly. WILLISTON ON CONTRACTS, § 65:1. Therefore, because parties usually prefer performance of a contract over payment of damages, courts cannot simply strike as in terrorem the legitimate use of liquidated damages to induce performance when evidence demonstrates one party intended to secure performance. Rather, other evidence of unreasonableness, such as that discussed above, is needed to show a clause is a penalty. ¶ 29 Personal service contracts are a particularly good example of the shortcomings of declaring a clause in terrorem based only on intent. Liquidated damages in a personal service contract induce performance by an employee by predetermining compensation to an employer if the employee leaves. However, the employer clearly prefers performance by the specific employee because that employee was chosen for hire. The preference for performance by a specific person is reflected in the rule that personal service contracts are not assignable. Further, because personal service contracts are not enforceable by specific performance, Reier Broad. Co. v. Kramer, 2003 MT 165, ¶ ¶ 11, 16, 316 Mont. 301, ¶ ¶ 11, 16, 72 P.3d 944, ¶ ¶ 11, 16, liquidated damages are an appropriate way for employers to protect their interests. See United States v. Martin (C.D.Cal.1989), 710 F.Supp. 271, 275 (liquidated damages in personal service contract is not involuntary servitude but monetary compensation for contract damages). Therefore, declaring such a clause in terrorem can remove an employer's legitimate efforts to secure performance by a specific employee. ¶ 30 Finally, courts also look to how the clause operates as an indicator of reasonableness. For example, courts look at whether the clause provides for the same damages without regard to the materiality of the breach or whether the clause penalizes a mere delay in payment. Wibaux v. Grinnell Live-Stock Co. (1889), 9 Mont. 154, 164-66, 22 P. 492, 495 (no provision for partial breach converts liquidated damages to a penalty); Comphealth, Inc. v. Highland View Outpatient Surgical Ctr. (1989), 240 Mont. 366, 369, 783 P.2d 1385, 1388 (substantial rather than full compliance with cancellation provisions sufficient to prevent award of liquidated damages). Again, however, these tests have failings as well in that reasonable clauses can be declared penalties. See DiMatteo, 657-706 (discussing the inefficient results under the various tests). ¶ 31 The end result of these rule variations is that a clause may be reasonable under one test, but unreasonable under another. Consequently, oftentimes, as in the case at bar, the parties disagree about what tests apply to the contract at issue. In addition, parties dispute who has the burden of proof and even whether the question is one of fact or law. To add to the lack of direction, courts tend to only discuss the test under which the clause in that case is held to be a penalty, rather than assessing the clause under each perspective. In sum, these various tests and others result in inconsistencies in the law of liquidated damages and Montana's jurisprudence is no exception. To illustrate, we now turn to Montana's case law on the subject.
¶ 32 While our first case addressing liquidated damages dates back to 1868, see Bautz v. Kuhworth (1868), 1 Mont. 133, the first modern case thoroughly discussing and analyzing liquidated damages at length is Morgen & Oswood Constr. Co. v. Big Sky of Montana, Inc. (1976), 171 Mont. 268, 557 P.2d 1017. [8] Morgen involved a contract for the construction of condominiums near a ski resort. Upon Morgen's completion of construction, Big Sky held back from the final payment liquidated damages of $500 per day of delay after the agreed completion date as per contract terms. Morgen refused this final payment and sued for the full contract price. Morgen, 171 Mont. at 277, 557 P.2d at 1022. ¶ 33 In holding the liquidated damages clause was enforceable by Big Sky, we set out a rule that essentially embodies all the tests discussed above. We stated: Whether the forfeiture provision imposed a penalty, or provided for liquidated damages, is to be determined from the language and subject matter of the contract, the evident intent of the parties and all the facts and circumstances under which the contract was made. The most important facts to be considered are whether the damages were difficult to ascertain, and whether the stipulated amount is a reasonable estimate of probable damages or is reasonably proportionate to the actual damage sustained at the time of the breach. Morgen, 171 Mont. at 273, 557 P.2d at 1020 (citation omitted). ¶ 34 After noting the evidence demonstrated damages from delay were impractical or difficult to fix because Big Sky lost months of sales opportunities right before the ski season, we held that Big Sky showed the $500 per day damages were reasonable because $500 was less than the anticipated daily costs of loan interest, utility costs, and lost rent. We also noted that the clause was reasonable because Big Sky introduced evidence showing its actual damages were greater than the liquidated damages. Morgen, 171 Mont. at 271, 557 P.2d at 1019-20. ¶ 35 In addition to comparing the liquidated damages to anticipated and actual damages, we also noted that the liquidated damages were reasonable in light of the intent of parties as shown by their precontract negotiations. Specifically, when given a later completion date during negotiation, Morgen lowered its bid by an amount less than the liquidated damages provided for in the contract with the earlier completion date and Big Sky refused this bid. Morgen, 171 Mont. at 274, 557 P.2d at 1021. Further, we noted the bargaining process itself was proper because most construction contractors are not so unsophisticated as to merit special protection by the courts and because while the liquidation amounts may not actually be bargained, the contractor can take this into account when he makes his bid. Morgen, 171 Mont. at 272, 557 P.2d at 1020 (citation omitted). Lastly, we noted that the language of the contract was only one consideration and not in any way controlling. Morgen, 171 Mont. at 272-73, 557 P.2d at 1020. Therefore, under any of the tests used to measure the reasonableness of liquidated damages, the clause in Morgen was enforceable. ¶ 36 Indeed, because Morgen addresses all the facts and circumstances under which the contract was made, including the difficulty of proof, the amount of anticipated and actual damages as compared to liquidated damages, the evidence of actual negotiation and intent of the parties, and the nature of the bargaining process between the two parties, the facts and holding of Morgen represent the ideal of liquidated damages under the principle of freedom of contract. The parties to Morgen negotiated with full information and predetermined a damage amount which was upheld by the courts. ¶ 37 The next two cases addressing liquidated damages, while brief, are consistent with Morgen even though Morgen is not cited. Erickson v. First Nat'l Bank (1985), 215 Mont. 350, 359, 697 P.2d 1332, 1338, addressed a contract for deed which provided that upon default, any payments already made under the contract would be considered liquidated damages for reasonable rental value. In upholding the clause, we stated, If, in fact, liquidated damages approximate those actually suffered, the amount is reasonable. Erickson, 215 Mont. at 359, 697 P.2d at 1338. Because evidence showed that the reasonable rental value of the property for the time the defaulting party was in possession approximated the liquidated damages clause, we upheld the clause under this actual damages rule. However, we noted that testimony by a representative of First National Bank was the only evidence submitted on the issue. See also Lilienthal v. District Court of Sixteenth Judicial Dist. (1982), 200 Mont. 236, 242, 650 P.2d 779, 782 (citing Morgen in support of remanding a damage award to the trial court because no evidence was taken to demonstrate $500 per day delay charges were reasonably related to the actual damages sustained by the Bank). ¶ 38 In Ruegsegger v. Welborn (1989), 237 Mont. 317, 321, 773 P.2d 305, 308, we considered a $75 per day holdover rent clause meant to apply if the tenants did not vacate agricultural property upon a date agreed upon by the parties. Again, we held the clause was reasonable and enforceable because it amounted to less than actual damages as shown by the market value of the annual lease as agreed to between the parties, because the agreement detailed what use of the property the holdover rent was intended to pay for, and because the terms reflected the parties' intent as demonstrated by actual bargaining. ¶ 39 Following Morgen, Erickson, and Ruegsegger, our precedent took two dramatic turns, first away from Morgen in Daugherty Cattle Co. v. General Constr. Co. (1992), 254 Mont. 479, 839 P.2d 562, then back again in Weber v. Rivera (1992), 255 Mont. 195, 841 P.2d 534. ¶ 40 In Daugherty, we addressed another contract for deed which required payments already made under the contract to be considered liquidated damages for reasonable rental value upon default. Citing Erickson, the buyer argued that actual damages in the form of reasonable rental value had to be considered in order to determine whether the $857,000.00 in principal payments and $385,447.50 in interest already paid during the approximately ten years the buyer was in possession should be considered a penalty relative to the contract price of $1,195,000.00. However, in contrast to Morgen's reliance on evidence of difficulty of proof, actual and anticipated damages, and intent, Daugherty affirmed the district court's grant of summary judgment. Specifically, Daugherty held that it was not necessary to hear evidence on the reasonable rental value in order to determine whether the liquidated damages clause was reasonable. Regarding Erickson's reliance on a comparison to actual damages, Daugherty stated the rule was not mandatory because Erickson does not require a judicial determination that the amount forfeited was a reasonable rental [value]. Daugherty, 254 Mont. at 484, 839 P.2d at 564. Further, Daugherty did not cite or discuss Morgen. However, the facts set forth in Daugherty recognize both that there was actual negotiation between the parties and that the parties' had relatively equal bargaining power. ¶ 41 Daugherty also upheld the district court's statements that to inquire into the actual damages would defeat the language of the contract. More to the point, because Daugherty upheld a summary judgment ruling, the opinion in effect held that there are no genuine issues of material fact involved in the determination of whether a liquidated damages clause should be declared a penalty. ¶ 42 Only three months later in Weber, we sharply departed from Daugherty without citing or discussing it. In Weber, we considered a form contract used to memorialize a land purchase which provided for 10% of the purchase price as liquidated damages. Citing the all the facts and circumstances under which the contract was made rule from Morgen, we held the provision was a penalty because there was no attempt by the parties to reasonably estimate anticipated damages. Specifically, we noted that because a form contract was used and both parties testified that no one knew how 10% of the purchase price was chosen, there was no evidence of actual negotiation between the parties so there was no attempt to reasonably estimate damages. We also held the provision a penalty because it entitled the sellers to the same amount whether they attempted to mitigate or not. Weber, 255 Mont. at 200-01, 841 P.2d at 537-38. Cf. Wendy's of Montana v. Larsen (1982), 196 Mont. 525, 529, 640 P.2d 464, 466 (bargained earnest money upheld as liquidated damages because buyer received benefit of the bargain when land was taken off the market for months). ¶ 43 While Weber questioned the language of the contract and required introduction of specific evidence unlike Daugherty, in one way Weber is similar to Daugherty because the opinion also rejected the actual damages test. The court stated: [A]ny relationship between the amount of actual damages suffered and the amount specified in the provision is merely a fortuitous coincidence and not the result of a reasonable estimate in advance to determine what the damages might be. The fact that the liquidated damage provision in this case may approximate the actual damages suffered, is insufficient by itself to create a valid liquidated damages provision. Our decision in Morgen ... makes it clear that other factors must also be considered. Weber, 255 Mont. at 201, 841 P.2d at 538. Therefore, by rejecting the actual damages test, Weber stands for the proposition that evidence of actual bargaining between the parties is required for form contracts. ¶ 44 After Weber, the next liquidated damages holding occurred in Story v. City of Bozeman (1993), 259 Mont. 207, 227-28, 856 P.2d 202, 214-15, another case involving a delay in construction liquidated damages provision. Rather than substantively consider the clause at issue, this Court disallowed the provision as a penalty purely as a matter of burden of proof. Because the party seeking to enforce the clause failed to present any proof that damages were extremely difficult or impracticable to ascertain or that the damages in the provision were reasonable in light of either anticipated or actual damages, we held the clause was a penalty. Story, 259 Mont. at 228, 856 P.2d at 215. Therefore, Story also contrasts with Daugherty and Morgen because rather than simply relying on the contract language like Daugherty or considering the nature of the bargaining process between the parties like Morgen, Story holds that any inquiry into a liquidated damages clause requires evidence beyond the language of the contract. Further, this requirement virtually guarantees that genuine issues of material fact would preclude summary judgment contrary to the holding in Daugherty. [9] ¶ 45 As this discussion demonstrates, our precedent has both required and completely ignored proof that damages be of a type difficult to ascertain; it has relied on proof of actual damages to show reasonableness and it has rejected proof of actual damages to show reasonableness; it has considered actual bargaining as only one factor to be considered and it has held actual bargaining is required; finally, it has considered the penalty/liquidated damages issue as one that requires evidence and also one that is based on contract interpretation. ¶ 46 In sum, our precedent on liquidated damages has numerous inconsistencies that make application of a uniform rule elusive at best. Yet, in order to resolve the issue presented and provide direction to contracting parties, we must resolve the disparities in our case law. To that task we now turn.
¶ 47 The above cases represent requirements that courts consider, to varying degrees, the difficulty of proof of damages, the anticipated and actual damages, evidence of intent or actual negotiation between the parties, and the nature of the bargaining process between the parties. However, as already discussed above, when the actual damages are difficult to prove, requiring proof of actual damages to demonstrate reasonableness puts the nonbreaching party in an unfair and untenable position. Further, requiring such proof defeats the efficiency of having such a clause in the first place. Indeed, by the rule from Story, any efficiencies gained from the clause are lost by automatically requiring extensive proof. Further, there may not be any evidence of actual negotiation between the parties due to the common use of form contracts. In addition, more than anything, proof of actual damages seems to be a convenient and comfortable way for a court to simply end the debate regarding a liquidated damages provision because the clause approximates the expectancy damages that a court would normally enforce anyway. At the same time, Daugherty represents the idea that the court simply enforce the contract language between the parties. However, such an approach simply ignores the penalty issue presented to a court. ¶ 48 After reviewing these cases, cases from other jurisdictions and academic writing on the subject, we conclude that the proper way to resolve the above inconsistencies is to analyze liquidated damages clauses from the perspective of whether or not the clause is unconscionable as indicated by the nature of the bargaining process between the parties. Unconscionability involves a two prong determination: whether the clause fits the doctrine of contract of adhesion such that the weaker bargaining party had no meaningful choice regarding acceptance of the provisions and whether the contractual terms are unreasonably favorable to the drafter, usually the party with superior bargaining power. Iwen v. U.S. West Direct, 1999 MT 63, ¶ ¶ 27-31, 293 Mont. 512, ¶ ¶ 27-31, 977 P.2d 989, ¶ ¶ 27-31. Whether or not the clause is unreasonably favorable to the drafter in turn involves an inquiry into whether the clause is within the reasonable expectations of the weaker party or is unduly oppressive to the weaker party. Iwen, ¶ 27. We are persuaded that unconscionability analysis provides the proper framework for a number of reasons. ¶ 49 First, as outlined above, the principle of freedom of contract holds that the parties themselves are in the best position to determine the terms of a contract because the parties are free to get information and bargain the private law of the contract in their own interest. Under unconscionability, a court will only strike a contract term if the bargaining process itself had some inherent unfairness that actually prevented the contract from being freely negotiated and thus defeated the principle of freedom of contract. Indeed, modern commentators on the subject of liquidated damages assert that unconscionability should be the only exception to court enforcement of liquidated damages clauses. [10] See DiMatteo, 733; Goetz, 594; David Brizzee, Liquidated Damages and the Penalty Rule: A Reassessment, 1991 BYU L.Rev. 1613, 1631-32 (hereinafter Brizzee). In addition to providing clear precedent for contracting parties, the commentators point out that a presumption of enforcement will inevitably award proper damages to the nonbreaching party and will fulfill the promise of efficiency that liquidated damages can bring. See DiMatteo, 655-706, 733; Goetz, 579-94; Clarkson, 357-78; Brizzee, 1617-31. Using economic analysis, the leading authors also assert that enforcement is the appropriate way to provide for damages that are impractical or difficult to fix. Id. Given this presumption of enforcement, unconscionability looks at whether [o]ppression and a disparity of bargaining power warped the negotiation process between the parties such that a court should step in and reform the disputed contract term. Estate of Michael v. Glacier Gen. Assurance Co. (1994), 264 Mont. 261, 266, 871 P.2d 272, 275. If unfair oppression is found, a court is then well grounded in declaring a clause to be a penalty. ¶ 50 Second, unconscionability analysis is the proper approach because it in fact already mirrors the law of liquidated damages. Courts initially exercised equitable power to strike liquidated damages clauses when a more powerful party used its power to set terms that were unfair and allowed double recovery. Goetz, 554-55. That parallel between penalties and unconscionability lives on in today's case law. When courts look at evidence of intent and actual negotiation between two parties to decide if a clause is a penalty, courts are simply looking at whether the bargaining process was free or oppressive and whether the weaker party had a meaningful opportunity to negotiate terms. Whether damages would be difficult to prove, whether actual negotiation occurred, and whether or not actual damages approximate anticipated damages are all simply evidence of whether the bargaining process was consistent with the principle of freedom of contract such that the term was within the reasonable expectations of the weaker party. ¶ 51 The cases discussed above, while seemingly inconsistent, also show that unconscionability analysis is at the heart of the law of liquidated damages because each of those cases demonstrate an underlying concern with the bargaining process. Even in Daugherty, though the trial court did not hear evidence on the issue of actual damages, the facts of the case make it apparent that the contract itself was negotiated between two sophisticated parties, neither of which could take advantage of the other in establishing the contract terms. See also, § 30-2-718, MCA, and § 30-2-320, MCA. ¶ 52 Third, by approaching liquidated damages from the perspective of unconscionability, future penalty questions can rely on our unconscionability jurisprudence. Specifically, precedence on form contracts and personal service contracts, issues both present in the case at bar, provide this Court with guidance on the fairness of the bargaining process. See, e.g., Chor v. Piper, Jaffray & Hopwood, Inc. (1993), 261 Mont. 143, 150, 862 P.2d 26, 30 (citation omitted) (Contracts of adhesion arise when a standardized form of agreement, usually drafted by the party having superior bargaining power, is presented to a party, whose choice is either to accept or reject the contract without the opportunity to negotiate its terms.) ¶ 53 Finally, by focusing on the fairness of the bargaining process, courts will less likely be drawn into an after the fact debate, a situation which frequently occurs with liquidated damages clauses. And, as mentioned, enforcement of inherently fair contracts will in fact provide for damages that are impractical to prove. ¶ 54 Accordingly, under the rule we adopt today, liquidated damages clauses are presumed enforceable. Further, the party seeking to avoid the clause has the burden of proving the clause is unconscionable. As a result, we overrule Story, 259 Mont. at 228, 856 P.2d at 215, to the extent it placed the burden on the nonbreaching party to prove a liquidated damages clause is enforceable. In addition, unless there are underlying disputed issues of fact, the question of whether a clause is unconscionable is purely a matter of law for a court to decide. [11] ¶ 55 While no specific evidence is required or is determinative of the ultimate issue of unconscionability, including evidence of intent, actual negotiation and whether there are damages, a court may consider any relevant evidence in its determination, including whether a clause attempts to waive the general duty to mitigate and whether a clause allows for the same damages without regard to the materiality of the breach. Because unconscionability considers, analogous to the statement in Morgen, all the facts and circumstances under which the contract was made, we overrule Daugherty to the extent it prevented one party from introducing relevant evidence by granting summary judgment based on contract language alone. Cf. 360 Ranch Corp. v. R & D Holding (1996), 278 Mont. 487, 492, 926 P.2d 260, 263 (citation omitted) ([S]ummary judgment is usually inappropriate where the intent of the contracting parties is an important consideration.). ¶ 56 To the extent Morgen, Erickson, Ruegsegger, Weber, Daugherty and any other liquidated damages cases address the nature of the bargaining process between the parties, those cases will continue to serve as precedent. To the extent those cases require a specific type of evidence, such as the actual damages noted in Erickson or the evidence of actual negotiation required by Weber, those cases are no longer binding. We note here, however, that this Opinion is not intended in any way to overrule Comphealth, 240 Mont. at 369, 783 P.2d at 1388, in that substantial rather than full compliance with contract terms can prevent an award of liquidated damages. ¶ 57 We also note in making this holding that it is not intended to address forfeiture under § 28-1-104, MCA, [12] because that issue, particularly as presented in contracts for deed, is not properly before us. See, e.g., Cook-Reynolds Co. v. Chipman (1913), 47 Mont. 289, 133 P. 694 (liquidated damages clause considered enforceable but struck down anyway under anti-forfeiture statute.)