Court Opinion

ID: 7821309
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:55:35.455822+00
Date Added: 2024-06-11T16:30:44.737729
License: Public Domain

Ernie E. Wright, Chief Judge, dissenting. I disagree with the majority in affirming this case. Although paragraph 9 of the uniform rental and laundry contract purports to obligate the appellant to purchase the uniforms supplied by appellee under the contract, in essence paragraph 9 of the form contract supplied by appellee attempts to provide for liquidated damages should appellant terminate the contract prior to the end of the two year term. It is clear from the contract and the evidence appellee is in the business of renting and providing laundry service for employees of business establishments, and is not in the business of selling merchandise. The only witness for appellee characterized the amount sued for as damages. The issue to be determined on appeal is whether paragraph 9 of the contract, which is set out in the majority opinion, is a valid and enforceable provision for liquidated damages or in the nature of a penalty as contended by appellant, if it is the latter, the court erred in failing to direct a verdict for appellant. Appellant concedes parties to a contract may stipulate in advance a sum to be paid for loss resulting from a breach of a contract and that such provision is enforceable unless it constitutes a penalty, in which event it is unenforceable. The clause in issue requires appellant to purchase the garments it was using pursuant to the contract at the time of cancellation for the same price regardless of whether the rental contract was cancelled at the end of one month or at the end of 23 months. If the contract were cancelled with only one month of the contract left, the appellee would under the garment purchase clause be entitled to considerably more money that it would have received in rentals if the contract ran its full term. In Montague v. Robinson, 122 Ark. 163, 182 S.W. 558 (1916), it was held that the contract will be construed as stipulating for a penalty, when it is agreed the same damages would be recoverable when the contract is only substantially performed as would be recoverable in the event of total failure of performance. The evidence shows appellee sets its rental-laundry charges to compensate for its services and recoup its uniform investment costs over a two year period. The average uniform life is considered to be three years. The evidence is undisputed the uniforms supplied appellee were in part new and in part used, taken from the large stock of garments appellee keeps on hand in the course of its business. The provision in question was not related to the actual damage appellee may have sustained, if any, by early cancellation. It would require appellant to purchase the uniforms at the same price whether the contract had been cancelled at the end of one month or at the end of twenty-three months. There is no indication it was the desire or intention of appellant to contract to purchase uniforms. All the evidence and circumstances indicate the purpose of the contract on the part of appellant was to secure a useful service, and the purpose of the appellee was to sell its service at a profit. It appears the garment purchase clause was inserted in the contract by the appellee for the purpose of imposing an obligation in the way of a penalty upon the appellee if it should terminate the contract before the expiration of the term, and that the amount the clause would require appellant to pay under such circumstances has no relation to any actual damages appelle might suffer because of the early contract termination. If the clause in question had provided upon cancellation Tor payment of a pro-rata part of the stipulated garment price based on the length of time the contract should be in force at the time of cancellation, the provision might well have been a valid stipulation for liquidated damages. • No evidence of actual damages sustained by appellee as a result of early termination was offered. In 'my view the court errec failing to construe the contract clause in issue as a penalty provision and in failing to direct a verdict for appellant absent proof of any actual damages. I would also point out the evidence is undisputed appellee first breached the contract in adding to its charges to appellant amounts up to $14.10 per invoice for “Pollution Control Charge.” The contract authorized no such extra charge. Also, I am unable to reconcile the number of shirts, 169, and the number of pants, 158, for which appellee sought payment with the number of garments specified in the contract or with the fourteen or fifteen employees of appellee who were being supplied with uniforms at termination of the contract. Appellee’s complaint and testimony dealt with the total number of garments it claimed to be furnishing appellant at the time of the termination of the contract rather than the specific uniforms provided pursuant to the contract sued upon. It is undisputed appellee was already supplying appellant with uniforms and laundry service prior to the date of the contract in evidence providing for some 28 additional uniforms and the suit is based on the one contract in evidence. Appellee offered no evidence attempting to separate the uniforms actually furnished under the contract sued upon from the uniforms it continued to furnish under the previously existing arrangement. The jury would have to speculate in arriving at an amount even if the contract provision in question were deemed a valid liquidated damage provision. I would reverse. Newbern, J., joins in this dissent.