1. In deciding whether a clause provides for liquidated damages or a penalty, should the courts ever consider the circumstances that caused the nonperforming party to breach the contract? Explain.

2. Why did the court determine that the contract clause at issue was an enforceable liquidated damages clause and not an unenforceable penalty clause?

Plaintiff [B-Sharp Musical Productions, Inc.,] and defendant James Haber entered into a contract pursuant to which plaintiff agreed to provide a designated 16-piece band on a specified date to perform at Mr. Haber’s son’s bar mitzvah. Mr. Haber was to pay approximately $30,000 for the band’s services. The contract contained a liquidated damages clause stating, in pertinent part, “If [the contract] is terminated in writing by [Mr. Haber] for any reason within ninety (90) days prior to the engagement, the remaining balance of the contract will be immediately due and payable. If [the contract] is terminated in writing by [Mr. Haber] for any reason before the ninety (90) days period, 50 percent of the balance will be immediately due and payable.”