Question

Kyle Bruno enters a contract with X Entertainment to be a stuntman in a movie. Bruno is widely known as the best motorcycle stuntman in the business, and the movie to be produced, Xtreme Riders, has numerous scenes involving high-speed freestyle street-bike stunts. Filming is set to begin August 1 tract have stipulated that the filming must end on time to capture the profits from the summer movie market. The contract stated that Bruno will be paid 10 percent of the net proceeds from the movie for his stunts. The contract also includes a liquidated damages provision, which specifies that if Bruno breaches the contract, he will owe X Entertainment $1 million. In addition, the contract includes a limitation-of-liability clause stating that if Bruno is injured during filming, X Entertainment’s liability is limited to nominal damages. Using the information presented in the chapter, answer the following questions.

1. One day, while Bruno is preparing for a difficult stunt, he gets into an argument with the director and refuses to perform any stunts at all. Can X entertainment seek specific performance of the contract? Why or why not?

2. Suppose that while performing a high-speed wheelie on a motorcycle, Bruno is injured by the intentionally reckless act of an X Entertainment employee. Will a court be likely to enforce the limitation-of-liability clause? Why or why not?

3. What factors would a court consider to determine whether the $1 million liquidated damages provision constitutes valid damages or is a penalty?

4. Suppose that the contract had no liquidated damages provision (or the court refused to enforce it) and X Entertainment breached the contract. The breach caused the release of the film to be delayed until the fall. Could Bruno seek consequential (special) damages for lost profits from the summer movie market in that situation? Explain.

Answer 1

1. No, because courts don’t like to grant it in service contracts because supervision is hard to maintain. “Specific performance calls for the performance of the act promised.” (Miller, p. 274). Looking at it from this perspective, it seems as though Bruno is in breach of his contract by refusing to perform his stunts. If this is true, then Bruno will owe 1 million dollars to the studio for this breach. From Bruno’s perspective, perhaps there is too much risk to his health and coupled with the limited liability of the studio, his concerns might be valid.

2. No, because he doesn’t know what is going to happen to him and one million dollars is a bit too much. “Clauses excluding liability for a fraudulent or intentional injury will not be enforced.” (Miller, p. 278) A court will not enforce the limitation of liability clause in the case of a reckless act.

3. Yes, because of the amount of time spent is outside the time limit on the contract. Courts will enforce a liquidated damages provision as long as the actual amount of damages is difficult to ascertain (in which case proof of it is simply made at trial) and the sum is reasonable in light of the expected or actual harm. If the liquidated sum is unreasonably large, the excess is termed a penalty and is said to be against public policy and unenforceable. In this case I do think that it is valid, due to the fact that we are talking about a summer blockbuster, which has the potential to bring in a lot of money, upwards of 100 million.

4. Bruno could seek the damages since he was the non-breaching party in this case. Bruno’s claim to the damages would depend on him proving that he suffered a significant loss due to the film’s late release. Since Bruno receives 10% of all of the films proceeds and even the studio was pushing for a summer release due to the monetary benefits, I think Bruno will receive compensation.

When consequential damages are awarded, compensation is given only for those injuries that a defendant could reasonably have foreseen as a probable result of the usual course of events following a breach. If the injury complained of is outside the usual and foreseeable course of events, the plaintiff must show specifically that the defendant had reason to know the facts and foresee the injury. In other words, to recover consequential damages, a breaching party must know (or have reason to know) in advance of the breach that special circumstances will cause the nonbreaching party to suffer an additional loss. Thus, if X Entertainment breached the contract with Bruno with the knowledge that it would delay the release of the film and result in lost summer profits, Bruno may collect consequential damages.