OLR Bill Analysis
AN ACT CLARIFYING CERTAIN DEPOSITORY INSTITUTION DISCLOSURE REQUIREMENTS.
This bill extends to contracts held by certain financial institutions, an exception to the prohibition on liquidated damages provisions in certain contracts. Under the law, no provision in a contract to purchase or lease goods or services primarily for personal, family, or household purposes that provides for the payment of liquidated damages in the event of a breach is enforceable unless:
1. the contract contains a statement in boldface type at least 12 points in size immediately following the provision stating “I ACKNOWLEDGE THAT THIS CONTRACT CONTAINS A LIQUIDATED DAMAGES PROVISION,” and
2. the person against whom the provision is to be enforced signs his or her name or writes his or her initials next to the statement.
This law provides that the requirement does not apply to (1) contracts between a consumer and an agency of the federal government, the state or any political subdivision of the state; (2) negotiable instruments; and (3) contract provisions for late fees, prepayment penalties, or default interest rates.
The bill further excludes contracts originated or held by Department of Banking (DOB) or federal bank regulatory agency regulated institutions, or any subsidiary or affiliate of such institutions. However, for contracts originated or held by an institution's subsidiary or affiliate, the subject matter of the contract must be a financial activity or incidental to such activity.
EFFECTIVE DATE: July 1, 2008
BACKGROUND
Liquidated Damages
“Liquidated damages” is an amount of money agreed upon by both parties to a contract that one will pay to the other upon breaching (breaking or backing out of) the contract or if a lawsuit arises due to the breach.
COMMITTEE ACTION
Banks Committee
Joint Favorable Substitute
Yea |
17 |
Nay |
0 |
(03/04/2008) |