Texas Business and Commerce Code 2A.504 – Liquidation of Damages
(a) Damages payable by either party for default or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor‘s residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission. In a consumer lease, a term fixing liquidated damages that are unreasonably large in light of the actual harm is unenforceable as a penalty.
(b) If the lease agreement provides for liquidation of damages, and such provision does not comply with Subsection (a) or such provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this chapter.
Terms Used In Texas Business and Commerce Code 2A.504
- Consumer lease: means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose, if the total payments to be made under the lease contract, excluding payments for options to renew or buy, do not exceed $25,000. See Texas Business and Commerce Code 2A.103
- Contract: A legal written agreement that becomes binding when signed.
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Goods: means all things that are moveable at the time of identification to the lease contract, or are fixtures (Section Texas Business and Commerce Code 2A.103
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Lease: means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease. See Texas Business and Commerce Code 2A.103
- Lessee: means a person who acquires the right to possession and use of goods under a lease. See Texas Business and Commerce Code 2A.103
- Lessor: means a person who transfers the right to possession and use of goods under a lease. See Texas Business and Commerce Code 2A.103
- Present value: means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. See Texas Business and Commerce Code 2A.103
- Restitution: The court-ordered payment of money by the defendant to the victim for damages caused by the criminal action.
(c) If the lessor justifiably withholds or stops delivery of goods because of the lessee‘s default or insolvency (Section 2A.525 or 2A.526), the lessee is entitled to restitution of any amount by which the sum of the lessee’s payments exceeds:
(1) the amount to which the lessor is entitled by virtue of terms liquidating the lessor’s damages in accordance with Subsection (a); or
(2) in the absence of those terms, 20 percent of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or $500.
(d) A lessee’s right to restitution under Subsection (c) is subject to offset to the extent the lessor establishes:
(1) a right to recover damages under the provisions of this chapter other than Subsection (a); and
(2) the amount of value of any benefits received by the lessee directly or indirectly by reason of the lease contract.