2025 Session Last amended: 1989 session

§ 336.2A-504 — Liquidation of Damages

Plain-Language Summary

A lease can set liquidated damages (a pre-set amount or formula for a default or other act or omission) but only if the amount is reasonable in light of the harm anticipated at the time of contracting. If the liquidated-damages provision does not meet that standard, or it is an exclusive remedy that fails its essential purpose, the other remedies in this article become available. If the lessor justifiably withholds goods because of the lessee's default or insolvency, the lessee may recover payments that exceed the liquidated amount, or absent such terms, 20 percent of the present value of the remaining rent (for a consumer lease, the lesser of that amount or $500), subject to offset for other damages and benefits the lessee received.

336.2A-504 LIQUIDATION OF DAMAGES.

(1) Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor’s residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission.

(2) If the lease agreement provides for liquidation of damages, and the provision does not comply with subsection (1), or the provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this article.

(3) If the lessor justifiably withholds or stops delivery of goods because of the lessee’s default or insolvency (section 336.2A-525 or 336.2A-526), the lessee is entitled to restitution of any amount by which the sum of the lessee’s payments exceeds:

(a) the amount to which the lessor is entitled by virtue of terms liquidating the lessor’s damages in accordance with subsection (1); or

(b) in the absence of those terms, 20 percent of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or $500.

(4) A lessee’s right to restitution under subsection (3) is subject to offset to the extent the lessor establishes:

(a) a right to recover damages under the provisions of this article other than subsection (1); and

(b) the amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.

History:

1989 c 232 art 1 s 2A-504

History: History: 1989 c 232 art 1 s 2A-504

Practical Notes

Your lease can include pre-set damages for breach, but the amount has to be reasonable measured against the harm expected when you signed, or it will not be enforced. If a lessor stops delivery because the lessee defaulted or is insolvent, the lessee can get back any prepayment above the liquidated figure, or 20 percent of the remaining rent’s present value (capped at the lesser of that or $500 in a consumer lease), reduced by other damages and any benefits the lessee already received.

Source: Minnesota Office of the Revisor of Statutes