Wassenaar v. Panos - Case Brief PDF

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Contracts II

Class 39

Wassenaar v. Panos Court: Supreme Court of Wisconsin (1983)

Facts: The dispute centers on the stipulated damages clause of a written employment contract by which Wassenaar (PL) was hired as general manager of the employer-DF, Towne Hotel. The employment contract sets forth the employee’s duties, salary, and periodic pay increases. It provides for a 3-year term of employment. DF terminated the contract 21 months prior to the contract’s expiration date.

Issues: Whether a liquidated damages clause in an employment contract may serve to eliminate the employee’s duty to mitigate damages.

Procedural History: Employee sued for damages. The employer answered the complaint and as an affirmative defense asserted that the employee had failed to mitigate damages. In a pretrial motion to strike the employer’s affirmative defense, the employee argued that mitigation was irrelevant because the contract contained a valid stipulated damages clause. The circuit court agreed. The trial court awarded $24,640. It was reversed by the court of appeals.

Judgement: Affirmed the circuit court, reversed the court of appeals.

Reasoning: The burden of proof lies with the employer, as the employer sought to set aside the bargained-for contractual provision stipulating damages. The question of whether the stipulated damage clause is valid turns on reasonableness, which in turn will turn on the 3-factor test (see outline). The court looked to all the evidence it was presented, first finding that it was reasonable, then turning to the duty to mitigate. In this instance, the employer failed to put forward any evidence that the employee was not mitigating damages or that the damages should be less (due to mitigation). Furthermore, the court found that once a stipulated damages clause is found to be reasonable, evidence of other salaries will not reduce the damages.

Rules: A stipulated damages clause will be upheld when the court finds that it is reasonable....