PA 08-69—sHB 5128
AN ACT CLARIFYING CERTAIN DEPOSITORY INSTITUTION DISCLOSURE REQUIREMENTS
SUMMARY: This act allows certain contracts held by certain financial institutions to include a liquidated damages provision. By law, provisions in a contract to purchase or lease goods or services primarily for personal, family, or household purposes that provide for the payment of liquidated damages in the event of a breach are unenforceable 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.
The act applies this exception to contracts originated or held by Department of Banking (DOB) or federal bank regulatory agency regulated institutions. It also applies to a subsidiary or affiliate of such institutions when the subject matter of the contract is a financial activity or incidental to such activity.
By law, the notice requirement also 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.
EFFECTIVE DATE: July 1, 2008
“Liquidated damages” is an amount of money that both parties to a contract agree that one will pay the other upon breaching (breaking or backing out of) the contract, or if a lawsuit arises due to the breach.
OLR Tracking: SC: km: pf: dw/tjo