Barrie School v. Patch

Court of Appeals of Maryland · 2007 · Contracts

Contractsliquidated damagesmitigationavoidable consequencespenaltyschool enrollment contractstipulated damagesactual damages

Facts

The Barrie School and the Patches signed a re-enrollment agreement for their daughter for the 2004-2005 school year. The agreement allowed cancellation without liability only if written notice by certified mail was received before May 31, 2004; otherwise, the parents agreed to pay the entire year's charges, with a $1,000 nonrefundable deposit and the remainder due in installments. The Patches did not cancel by the deadline and instead sent a faxed cancellation on July 14, 2004, refused to pay the remaining tuition, and enrolled their daughter elsewhere. The school sued for the remaining tuition, interest, and attorney's fees, while the parents argued, among other things, that the school had a duty to mitigate despite the liquidated damages clause.

Issue

When a contract contains a valid liquidated damages clause, must the non-breaching party mitigate damages after the breach? Relatedly, may the breaching party avoid the stipulated sum by showing the non-breaching party suffered no actual harm?

Rule

A non-breaching party has no duty to mitigate damages where the parties have agreed to a valid liquidated damages clause. In Maryland, a liquidated damages clause is enforceable if it states a certain sum, reasonably estimates anticipated damages at the time of contracting, and addresses damages that were difficult or impossible to estimate at that time; once valid, it replaces any post-breach inquiry into actual damages, including mitigation.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeshore Arts Academy in Chicago requires parents to sign an enrollment contract stating that if they withdraw a student after June 15, they must pay the full annual tuition as liquidated damages. At signing, both sides understood that staffing, class sizes, and budget allocations made the school's loss from a late withdrawal very difficult to estimate, and the tuition amount was a reasonable forecast of anticipated harm. In August, Nora and Daniel Kim withdrew their son, and the school made no effort to find a replacement student.

If the school sues for the stipulated tuition, what is the strongest argument for the school under the governing rule?

Explanation. A non-breaching party has no duty to mitigate where the contract contains a valid liquidated damages clause. The majority treated mitigation as part of court-assessed actual damages, whereas valid liquidated damages substitute the parties' agreed remedy and eliminate further inquiry into actual loss or avoidable consequences.