Will an Idaho court enforce this liquidated-damages clause in our sale-of-goods contract?
Only if the amount is reasonable in light of the anticipated or actual harm from the breach: otherwise it is void. Idaho Code § 28-2-718(1): "Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty." The statute also supplies a buyer-protective default when the SELLER withholds delivery for the buyer's breach and there is no liquidated-damages clause: the buyer may recover back whatever it paid in excess of 20% of the value of the total performance it owed, or $500, whichever is smaller (§ 28-2-718(2)(b)). That figure is gross, not net: § 28-2-718(3) makes the buyer's restitution right "subject to offset to the extent that the seller establishes" both a right to damages under some other provision of the chapter and "the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract", and § 28-2-718(4) counts goods the seller received as payments for the same calculation.
The trap
§ 28-2-718 governs only contracts for the SALE OF GOODS under Idaho's UCC Article 2: this rule does not extend to a services, real-property, or other non-goods contract's liquidated-damages clause, and no Idaho common-law liquidated-damages/penalty case construing a non-UCC contract was located in the searches run for this rule (an honest gap, not a resolved one). Perron v. Martinez (2025, Ct. App.) involves a liquidated-damages clause in a construction addendum, outside UCC Article 2, but that opinion's own citation does not yet resolve to a reporter volume and page in the material available here and its holding on the enforceability standard was not confirmed in the window read, so it is not cited here. Note also that § 28-2-718(1)'s reasonableness test looks at BOTH anticipated harm at formation AND actual harm from the breach: the statute does not, on its face, pick only a forward-looking (at-the-time-of-contracting) test the way some states' common-law liquidated-damages doctrines do, so a clause defended only on the ground that it looked reasonable when the parties signed is answering half of what the Idaho statute asks.
5 authorities
- statuteIdaho Code § 28-2-102enactment date not established
The words that state the rule
Unless the context otherwise requires, this chapter applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this chapter impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.
- statuteIdaho Code § 28-2-718enactment date not established
The words that state the rule
Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
- statuteIdaho Code § 28-2-718enactment date not established
The words that state the rule
Where the seller justifiably withholds delivery of goods because of the buyer’s breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds (a) the amount to which the seller is entitled by virtue of terms liquidating the seller’s damages in accordance with subsection (1), or (b) in the absence of such terms, twenty per cent (20%) of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.
- statuteIdaho Code § 28-2-718enactment date not established
The words that state the rule
(3) The buyer’s right to restitution under subsection (2) is subject to offset to the extent that the seller establishes (a) a right to recover damages under the provisions of this chapter other than subsection (1), and (b) the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.
- statuteIdaho Code § 28-2-718enactment date not established
The words that state the rule
(4) Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer’s breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this chapter on resale by an aggrieved seller (section 28-2-706).
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.