Cake, Fire, and Liquidated Damages

Ohio enforces a liquidated-damages clause if, at the time of contracting, (1) actual damages from a breach would be difficult to ascertain and (2) the stipulated amount is a reasonable forecast of probable loss, not a penalty. Courts look at anticipated harm, not actual harm after breach, and ask whether the amount is disproportionate or arbitrary. Here, lost holiday sales and goodwill may be hard to estimate, which supports the clause. The rate is $150 per day, capped at $4,500; compared with a 600-cake holiday order and the disruption of late delivery, that is a modest, limited forecast rather than an arbitrary penalty. The bakery bears the burden to prove the clause is a penalty. A court could still invalidate it if the grocery chain’s actual loss was easily calculable or if $150 per day bore no relation to expected loss, but on these facts the clause is likely enforceable.

The clause excuses delays caused by events “beyond [the bakery’s] reasonable control, including equipment failure.” The word “including” brings equipment failure within the clause, but the failure must still be beyond reasonable control. A main oven failing during a time-is-of-the-essence holiday contract is a foreseeable risk, especially when the bakery had a backup oven. The bakery must show that the failure was not caused by poor maintenance, that it could not reasonably have prevented or mitigated the delay, and that it gave any required notice. On the stated facts-replacement part delay and an available backup-the bakery likely cannot carry that burden. The clause is also the grocery chain’s drafting, so ambiguity would be construed against the grocery chain, but the clause is not ambiguous about equipment failure; the dispute is control and foreseeability.

If the liquidated-damages clause is enforceable and the force-majeure clause does not excuse the delay, the grocery chain may retain $2,250-15 days at $150-without proving actual damages. Liquidated damages substitute for proof. If the court finds the clause a penalty, the grocery chain may recover only actual damages, which it must prove; it cannot rely on the $150 figure. If the force-majeure clause applies, the bakery is excused and may recover the withheld amount, but the bakery would need to show the oven failure was beyond its reasonable control and that it mitigated. The most likely result is that the clause is enforced and the deduction stands, because the bakery assumed the risk of its own equipment failure and the rate is a reasonable, capped forecast.