Breeden Dodge, Inc. v. Acme Industrial Laundry, Inc.

Marian F. Penix, Judge. Breeden Dodge, Inc. and Laundry, Inc. executed a “Preferred Risk Agreement” on August 3, 1977. The Agreement provided that, for a term of two years, Acme would furnish uniforms to Breeden’s Service Department employees and Breeden would pay a fee for Acme’s services in supplying and laundering the uniforms and servicing the account. The contract provided Breeden could cancel its remaining obligations prior to the end of the two year term by giving thirty (30) days’ written notice of its intention to cancel and, thereafter, purchasing the uniforms Acme had purchased and provided for Breeden’s employees. On August 14, 1978 Breeden notified Acme by letter of its intention to cancel as of September 15, 1978. However, Breeden refused to purchase the uniforms. Acme sued Breeden to recover a total of $2,286.50. The jury returned a verdict for Acme in the amount of $1,896.00. Breeden had moved for a directed verdict at the close of Acme’s case in chief. Breeden appealed. Breeden contends the Court erred in not granting a directed verdict. The interpretation placed upon Paragraph 9 of the Contract is the crux of this case. Paragraph 9 provides: 9. Should the Customer desire to cancel the service during the term of this agreement, Customer agrees to purchase the stock of garments (shirts, pants, jackets, etc.) as listed above or added thereto that are provided for use of Customer or his employees from the Company at prices listed below. In the event of such cancellation, Customer must give thirty (30) days written notice of intention to so cancel to the Company, and agrees to purchase garments which are the subject matter of this agreement at the following prices: $12.00 per suit; $5.50 per shirt; $6.50 per pair of pants; $15.00 per jacket. Breeden alleges Paragraph 9 is not enforceable as a liquidated damages clause, but is void as a penalty and because Acme presented no evidence of actual damages. Paragraph 9 does not specify damages due for breach of the parties’ agreement. It provides a means by which Breeden could voluntarily terminate the contractual relationship before the end of the two year term. Breeden did not breach the Contract by terminating Acme’s service before the end of two years — the Contract gave Breeden the right to terminate early. However, this right to terminate was conditioned upon Breeden’s reimbursing Acme for the uniforms Acme had purchased for Breeden. Breeden failed to meet one of the conditions for early termination. Acme was entitled to recover an amount Breeden contracted to pay if Breeden did in fact elect to terminate prior to the end of the full two year term. We hold Paragraph 9 is enforceable as a valid contract which afforded the customer Breeden the valuable right to early termination conditioned upon Breeden’s purchase of the uniforms. If we were to assume Paragraph 9 is a liquidated damages clause, it is still valid. A contractual stipulation for payment of a designated sum upon default will be sustained as liquidated damages where it appears the damages will be uncertain and difficult to ascertain. See Foran v. Wisconsin and Arkansas Lumber Co., 156 Ark. 346 (1923). Acme’s witness testified it would be impossible to calculate actual damages were it not for Paragraph 9. The Contract was for a two year period. It required Acme to supply uniforms not only to the employees initially listed on the Contract but also to all of Breeden’s new employees subsequently added to the service. Breeden had a continuous turnover in employees and during the one year period of the Contract twenty-seven (27) new employees were added at one time or another. Even if we don’t consider Acme’s overhead and lost profits, clearly the fluctuation in the number of employees covered by the service contract would make ascertainment of damages difficult. We find the Contract in question is a suitable one for stipulation of damages. Once we determine the stipulation is suitable we must decide whether the amount stipulated is reasonable under the circumstances. The Contract provided only those uniforms being provided at the time of termination must be purchased. At the time of termination Acme was providing eleven men with shirts. During the one year term Acme had supplied twenty-seven different employees. The number specified is reasonable. Rather than seeking reimbursement for all uniforms which had ever been placed in service or trying to estimate the number which would be provided during the remaking twelve months, the actual number at time of termination is specified. We find this to be reasonable. The figures in Paragraph 9 represent the average cost of each garment. This is perhaps the only practical measurement of the value of each garment. An average cost eliminates the necessity of an individual evaluation of the uniforms which would be a very difficult task. We hold such a measurement to be reasonable. Acme’s witness testified that at no time in the two year contracts would his company make more money if the customer cancelled and bought the uniforms at the prices specified in Paragraph 9 than the company would make if the customer completed the term of the Contract. He further testified Acme’s profits are realized by establishing and maintaining a long-term, continuous relationship with the customer rather than instituting a service and then selling the customer the uniforms. We find the Trial Court did not err in overruling Breeden’s Motion for Directed Verdict. We therefore affirm the Jury Verdict and the Judgment entered thereon in favor of Acme. Acme has asked for reasonable attorneys’ fees and printing costs incurred in its preparation of a Supplemental Abstract as authorized by Rule 9(e)(1) of the Rules of the Supreme Court and the Court of Appeals. Although the abstract of Mr. Freeman’s testimony is not as detailed as it might be, we do not find we were prevented from adequately reviewing and considering the appeal upon its merits. We have encouraged counsel to avoid surplusage. In the case at hand we find the appellant’s brief is a result of Breeden’s counsel striving to include only that portion of lengthy testimony considered pertinent and necessary to the resolution of this appeal. Therefore we deny Appellee’s request for costs and fee for preparation of the Supplemental Abstract. affirmed. Wright, C.J., and Newbern, J., dissent.