In a decision with sweeping consequences for equipment lessors, the bankruptcy court (SDNY) in Republic Airways held that a liquidated damages provision in a true lease is an unenforceable penalty if it provides for the unconditional transfer of residual value risk or market risk only upon default, without a cognizable connection to any anticipated harm … Continue Reading
Liquidated damages in true leases: applicable law Uniform Commercial Code Section 2-A-504 is the applicable law regarding liquidated damages in a lease agreement. Section 2-A-504(1) provides that: “Damages payable by either party for default . . . including . . . loss or damage to lessor’s residual interest, may be liquidated in the lease agreement … Continue Reading
