Opinion ID: 2200390
Heading Depth: 1
Heading Rank: 1

Heading: Reasonable endeavor to fix fair compensation.

Text: Safari cites Heikkila v. Carver, 378 N.W.2d 214 (S.D.1985), and argues that the trial court erred in finding that there was no reasonable endeavor by the parties to fix a fair compensation. The Heikkila court emphasized the buyers' opportunity to closely review the agreement with their attorney and the parties' arms-length bargaining for the sale contract including the liquidated damages provision. The court further stated that the default provision itself was the best evidence of the parties' efforts and intentions at the time of sale. Id. at 217. Safari points out that, similar to Heikkila, both parties were represented by competent legal counsel at the time of the transaction and the buyers reviewed the agreement extensively with their attorney. In holding that the parties had not attempted to fix a fair compensation during their negotiations, the trial court stated that there was no discussion of damages for breach, or any attempt to stipulate to an amount of damages representing a fair loss of profits or rental value. The court should consider the instrument as a whole, the situation of the parties, and the surrounding circumstances. Prentice v. Classen, 355 N.W.2d 352 (S.D.1984); Walter Motor Truck Co. v. State, Dep't of Transp., 292 N.W.2d 321 (S.D.1980). The fact that the original down payment of $75,000 was reduced to $50,000 is a consideration, but not determinative as claimed by the majority. The testimony shows that Buyers were experienced in business and aware of the challenges and uncertainties associated with operating a business. They reviewed the agreement in detail with their attorney and understood that all payments made under the contract would be lost in the event of breach. In fact, Buyers' attorney made several changes to other provisions of the agreement during the course of negotiations. This would indicate that Buyers understood the liquidated damages provision, believed it was reasonable, and believed the loss of the down payment was reasonable compensation to Sellers in the event of Buyers' breach. In short, as part of an agreement that was bargained for at arms length, the liquidated damages provision must be considered bargained for at arms length. As in Heikkila, the liquidated damages provision itself is the best evidence of the parties' efforts and intentions to fix a fair compensation.