InHousewise Construction Ltd. v. Golden Sichuan, 2012 BCPC 43 (CanLII), , the Plaintiff, Housewiseprovided garbage disposal bins to the defendant Golden Sichuan. The written contract provided tat if the defendant breached the contract the defendanthadto pay for all three years of the rental agreement. The defendantrepudiated the contract after two months (i..e. with 34 months remainingon the contract). The plaintiff sued for all 36 months.

At trial, the judge ruled that the contract was breached but that the written clause requiring paymentfor the balance of 34 months was a penalty andtherefore not enforceable.

In this discussion, set out the legal principles that the judge discusses as to when a liquidated damages clause is enforceable and when the same clausecould be interpreted as a penalty and not enforceable.