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Money For Nothing

In a recent case, lenders lent $1.8 million to borrowers, who defaulted.  The parties settled all contractual and other claims for $2.1 million.  The parties also executed a stipulation for entry of judgment which the lender could file ex parte in the event of any failure by the borrower to timely cure any non-payment.  However, this stipulation also stated that in the event of default, the borrowers would be liable to pay $2.8 million plus interest to the lender.  The California appellate court found that $700,000, which corresponded to six months’ interest on the entire principal loan, bore no reasonable relationship to the range of actual damages the parties could have anticipated from a breach of the settlement agreement and was thus unenforceable.

https://lawprofessors.typepad.com/contractsprof_blog/2019/10/money-for-nothing.html

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