A New York appellate court recently ruled in a significant breach of contract case involving PTI Imp, LLC and Software Sculptures Consulting, Inc. The decision, made on May 6, 2026, clarifies the enforceability of liquidated damages clauses in contracts. This ruling affects businesses that rely on such clauses to secure compliance from partners and clients.
The case stems from a purchase supply agreement made in June 2012, where Software Sculptures agreed to buy tile products from PTI Imp and meet specific monthly purchase requirements over a 12-year period. The agreement included a liquidated damages clause, which allowed PTI Imp to acquire property from Software Sculptures if the latter failed to meet its obligations. This dispute escalated when PTI Imp claimed that Software Sculptures did not fulfill its purchase requirements, leading to a breach of contract.
In April 2018, PTI Imp initiated legal action against Software Sculptures, seeking damages and specific performance of the liquidated damages clause. The defendants countered by asserting that the agreement was unconscionable and sought to dismiss PTI Imp's claims. The case moved through the New York court system, ultimately reaching the Appellate Division.
The court's ruling addressed several key issues. It affirmed the lower court's decisions, including the denial of the defendants' motion to amend their answer and the granting of PTI Imp's cross-motion for summary judgment. The court stated, "The defendants failed to establish, prima facie, that the liquidated damages clause of the agreement was an unenforceable penalty." This indicates that the court found the liquidated damages clause to be valid and enforceable.
Judge Colleen D. Duffy, along with Judges Deborah A. Dowling, Phillip Hom, and Susan Quirk, concurred in the decision. The ruling emphasized that a liquidated damages clause is enforceable if it reasonably estimates the probable loss from a breach and if actual damages are difficult to ascertain.
The court also noted, "An enforceable liquidated damages clause is 'an estimate . . . of the extent of the injury that would be sustained as a result of breach of the agreement.'" This reinforces the principle that businesses can rely on such clauses to protect their interests in contractual agreements.
This ruling has broader implications for businesses that utilize liquidated damages clauses in their contracts. It clarifies that such clauses can be upheld in court if they are reasonable and serve as a genuine estimate of potential losses. This decision may encourage businesses to continue using these clauses to secure compliance from their partners.
Going forward, companies entering into contracts may feel more confident in including liquidated damages clauses, knowing that they have legal backing if disputes arise. The ruling also serves as a reminder that parties seeking to challenge such clauses must provide substantial evidence to prove they are penalties rather than legitimate estimates of damages.
As for the defendants in this case, they may consider their options for appeal. However, the court has affirmed the lower court's judgment, making it challenging to overturn. There are no indications of related cases pending that could affect this ruling.