Opinion ID: 2103007
Heading Depth: 2
Heading Rank: 1

Heading: Sum Certain

Text: Meide & Son argues that a valid liquidated damages clause must state as stipulated damages a sum which is definite or certain and which needs no extrinsic evidence for its determination. This argument calls upon us to interpret the language of our liquidated damages statute, NDCC § 9-08-04. Under the statute, contractual provisions which determine damages in the event of breach, are void except that the parties may agree therein upon an amount presumed to be the damage sustained by a breach in cases where it would be impracticable or extremely difficult to fix the actual damage. NDCC § 9-08-04. [Emphasis added.] Meide & Son asserts that, because the liquidated damages clause provides a formula for calculating damages instead of a certain sum of money, it does not set forth an amount as required by § 9-08-04 and is, therefore, void. Where the legislature's intent is so apparent from the face of the statute that there can be no question as to its meaning, there is no room for construction thereof, and the court will follow the rule of literal interpretation in applying the words of the statute. State for Benefit of Workmen's Compensation Fund v. E.W. Wylie Co., 79 N.D. 471, 58 N.W.2d 76 (1953). In interpreting a statute, words must be given their plain, ordinary and commonly understood meaning, and consideration should be given to the ordinary sense of statutory words, the context in which they are used, and the purpose which prompted their enactment. Stutsman County v. State Historical Society, 371 N.W.2d 321 (N.D.1985); NDCC § 1-02-02. We cannot discern from the term amount whether the legislature intended to except from its prohibition of liquidated damage provisions, use of a formula for calculating damages in the event of breach. The ordinary meaning of amount as garnered from Webster's Unabridged Dictionary does not resolve the problem: 1 a: the total number or quantity: aggregate  Webster's Third New International Dictionary. This ordinary meaning leaves uncertain whether an amount may be stated in terms of a formula. Since a plain reading of the statute according to the ordinary meaning of its terms fails to resolve the question, we conclude the statute is ambiguous and in need of interpretation. See Barnes City Education Association v. Barnes City Special Education Board, 276 N.W.2d 247, 251 (N.D.1979). When the meaning of a word in a statute is doubtful, it is appropriate to refer to related legislation to determine the sense in which the word was employed in the particular statute. Grabow v. Bergeth, 229 N.W. 282, Syl. 3 (N.D.1930); Matter of Estate of Knudsen, 342 N.W.2d 387, 390 (N.D.1984). NDCC § 41-02-97(1) (UCC 2-718) is a comparable liquidated damages statute governing contracts for the sale of goods between merchants. It states: 1. Damages for breach by either party may be liquidated in the agreement but at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty. [Emphasis added.] In Farmers Union Grain Terminal Ass'n v. Nelson, 223 N.W.2d 494 (N.D.1974) we at least implicitly construed the word amount in NDCC § 41-02-97(1) as authorizing a liquidated damages clause to provide a formula for calculating damages, not a precise sum. We upheld the clause despite its use of a formula and not a dollar amount, and despite the need for extrinsic evidence. We relied on § 41-02-97 in concluding that the liquidated damages clause was designed to provide an agreed method of computing loss in the event of breach. See Section 41-02-97, N.D.C.C. (Section 2-718, U.C.C.). Farmers Union Grain Terminal Ass'n v. Nelson, 223 N.W.2d at 498. We discern no legislative intent to restrict the meaning of amount to a sum certain in § 9-08-04, while giving it a more expansive meaning in § 41-02-97(1), NDCC. Because we believe the legislature used the word amount in the same sense in § 9-08-04 as it did in § 41-02-97, we construe § 9-08-04 as authorizing the use of an agreed method of computing loss in the event of breach. Further, we note that when the legislature meant sum certain it used that term, rather than amount. [7] On the one hand, the legislature used the word amount in § 9-08-04 instead of the term sum certain. On the other hand, the term sum certain, not amount, is found in NDCC § 41-02-06 (UCC 3-106) as a requirement for negotiable instruments, while amount, rather than sum certain, is the standard for liquidated damages provisions in § 41-02-97(1) (UCC 2-718). The legislature thus has differentiated between the two terms and we give effect to that distinction. We consider, finally, the usefulness and efficacy of liquidated damages provisions in general, and in particular, the great difficulty presented by this case in estimating the damages suffered from such elements as good will and lost business opportunity. It would be ludicrous to conclude that the legislature, after making the extreme difficulty of ascertaining damages a prerequisite for valid liquidated damages, would then insist upon a specific or precise quantification of those damages without resort to a more reliable method of computation. We construe a statute to avoid absurd results. Stutsman County v. State Historical Society, 371 N.W.2d at 325. We hold, therefore, that under NDCC § 9-08-04, a liquidated damages provision need not state a sum certain, but may provide for damages to be calculated with the aid of extrinsic evidence. Accord, Knutton v. Cofield, 273 N.C. 355, 160 S.E.2d 29 (1968); Twentieth Century-Fox Film Corp. v. Woods Amusement Corp., 304 F.Supp. 23 (N.D.Ill.1969).