Some advertising contracts allow an out of home company to declare the future amounts due if a client defaults.    Vincent v Grayson suggests that you’ll have a hard time recovering future amounts owed when a contract defaults unless you can prove actual damages.  Here are the facts.

• In July 1966 Tratel Fresno, Inc. (“Tratel”) entered into an advertising contract to rent three billboards for 36 months from Vincent Signs.
• The ad contracts contained the following enforcement clause: “In the event that suit is instituted to enforce this contract, or any part thereof, we promise to pay a reasonable attorney’s fee in such suit in addition to the costs allowed by law, and agree that if any monthly payment remains in default for thirty (30) succeeding days, then at the option of the VINCENT SIGNS the entire balance due under this agreement shall immediately become due and payable OR and VINCENT SIGNS may discontinue the services and/or sue for the time used.”
• In January 1966, 6 months into the ad contract, Vincent Signs sued Tratel for default and exercised its option to declare all future installments payable immediately together with interest at 7% and attorneys fees.
• The owners of Tratel asserted a variety of defenses including the fact that the liquidated damages clauses in the advertising contracts were forfeiture provisions and unlawful.
• In October 1969 a California court rendered a judgement against the owners of Tratel for the amount of the default judgement together with interest at 7%.  Tratel’s owners appealed.
• In February 1973 a California appeals court ruled that the default judgement should not be enforced because the default judgement awarded damages in the amount of the total unpaid contract price and Vincent Signs”did not allege or prove facts which justified such extraordinary relief.”  It was not OK to receive 36 months rent for 6 months performance without proof of damages.

Insider’s take:  A damages clause which makes future balances due in the event of a contract default may not be enforceable unless you can prove actual damages.  What’s been your experience collecting damages after an ad contract default?  Let Insider know using the form below.

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