The problem lies in the common belief that one can draft a contract which imposes a penalty for breach of contract.
While courts often allow some measure of liquidated damages they generally will not protect a drafting party by enforcing a penalty clause. So, if you were challenged by a customer when trying to enforce an early termination fee of $1000.00 on a 2 year term internet service agreement, you would have to show that you would likely loose $1000.00 in expenses and ascertainable future revenues. For example: If you charge $50.00 per month for internet, you could probably show $1000.00 in potential loss over the two year term but remember that the amount of loss diminishes the further into that term that you get. BUT... Now look at your example of a $10,000 termination fee. No court would enforce a $10,000 termination fee for $50/month internet because it would clearly be a penalty. Worst case if you paid $1000.00 for the CPE, $500 for the install, and lost $1200 in future revenues, you would still only have lost $2700.00 total. So the court would cap you at $2700.00 worth of liquidated damages. I know that everyone would like to think that there is an absolute freedom to put anything you want into a contract, but it's simply not true. Courts reform contracts when the contracts try to impose penalties. The policy reason for doing disallowing penalties is to promote freedom of contract. In that sometimes it's better for competition, the economy, and the marketplace for parties to be able to BREACH their contractual agreements. Therefore we want to allow breaches to occur when it would economically make sense to leave the contract or break its terms. Let's face it... if you could ALWAYS write a big penalty into every contract, NO ONE would ever be able to willingly break a contract. - Larry -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Scottie Arnett Sent: Monday, June 02, 2008 12:24 PM To: WISPA General List Subject: Re: [WISPA] FCC changes I still don't "get" it. If you specifically stated the early termination fee in the contract and provide a well defined SLA and what will happen if you do not provide that SLA to the customer, then what is to be argued? If the contract says there is a $1000 termination fee or a $10,000 termination fee, it should not matter. When you both sign your name to the contract, you have both agreed to all terms "IN" that contract. It is what is left out of the contract that should be dealt with in court. As per this discussion, the Internet in "most" part is still unregulated. Just because the FCC rules it on the cell carriers (which I think is still not right), it should not be passed on to ISP's until the Internet is a fully regulated industry that falls under their control. Scottie ---------- Original Message ---------------------------------- From: "Larry Yunker" <[EMAIL PROTECTED]> Reply-To: WISPA General List <wireless@wispa.org> Date: Mon, 2 Jun 2008 01:12:14 -0400 >Whether it is the "job" of the FCC to ensure fairness with regards to >telecommunications contracts is yet to be determined. Traditionally, STATE >COURTS have resolved contractual disputes. However, in 2005, a cell carrier >named SunCom filed a petition with the FCC asking the FCC to declare that >early termination fees fall under "rate charged" doctrine and therefore fall >under the exclusive jurisdiction of the FCC (thus blocking STATE COURTS from >rendering decisions against the cell carrier). The FCC has held comment on >the issue and was thought to be getting close to a ruling on the issue when >SunCom suddenly and unexpectedly SETTLED their case (March 21, 2008) with >their client(s) and dropped the petition for the declaratory ruling. > >The net effect is that the FCC hasn't decided whether early termination fees >as a contractual issue are strictly a FEDERAL issue to be decided by the FCC >or if they are a traditional common law issue to be decided at the state >level. The meetings later this month may shed some further light on how >ETF's will be adjudicated in the future. It certainly appears that the FCC >is moving towards regulation of the marketplace. > >Don't take my comments to be weighing in favor of FCC regulation of this >issue. I believe that state courts could certainly resolve these disputes >just as well as the FCC (albeit inconsistently across state lines). Common >law contract law as well as consumer protection statutes would address many >of the concerns that have been raised with regards to early termination >fees. The problem that we have today is that many state & federal courts >have placed litigation regarding early termination fees on hold UNTIL the >FCC declares whether or not they are going to completely preempt the field >of telecommunication termination fees. This indecision by the FCC has held >up litigation for up to three years in state and federal courts. The main >thing that we need right now is definitive action of some sort so that >subscribers have rights either in state court or before the FCC and so that >PROVIDERS have some sense of direction with regards to their obligations or >limitations under common law and regulatory regimes. > >- Larry > > >-----Original Message----- >From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On >Behalf Of [EMAIL PROTECTED] >Sent: Monday, June 02, 2008 12:12 AM >To: WISPA General List >Subject: Re: [WISPA] FCC changes > > >++++++++++++++++++++++++++++++++ ><insert witty tagline here> > >----- Original Message ----- >From: "Larry Yunker" <[EMAIL PROTECTED]> >To: "'WISPA General List'" <wireless@wispa.org> >Sent: Sunday, June 01, 2008 12:00 PM >Subject: Re: [WISPA] FCC changes > > >> Travis, >> >> I agree wholeheartedly that a customer should be held to the terms of a >> contract and certainly should be responsible for reading and accepting the >> terms of the agreement. >> >> The issue is that some contracts are designed to penalize rather than >> recoup >> costs. > > >Again... So? It is not the job of government to "ensure" that everything a > >customer chooses to do is "made fair" for him. > > > > >--------------------------------------------------------------------------- - >---- >WISPA Wants You! Join today! >http://signup.wispa.org/ >--------------------------------------------------------------------------- - >---- > >WISPA Wireless List: wireless@wispa.org > >Subscribe/Unsubscribe: >http://lists.wispa.org/mailman/listinfo/wireless > >Archives: http://lists.wispa.org/pipermail/wireless/ > > > >--------------------------------------------------------------------------- ----- >WISPA Wants You! 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