§ 2718. Liquidation or limitation of damages; deposits.

(a) Liquidated damages in agreement.--Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.

(b) Right of buyer to restitution.--Where the seller justifiably withholds delivery of goods because of the breach of the buyer, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds:

(1) the amount to which the seller is entitled by virtue of terms liquidating the damages of the seller in accordance with subsection (a); or

(2) in the absence of such terms, 20% of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.

(c) Offset.--The right of the buyer to restitution under subsection (b) is subject to offset to the extent that the seller establishes:

(1) a right to recover damages under the provisions of this division other than subsection (a); and

(2) the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.

(d) Payment in goods.--Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (b); but if the seller has notice of the breach of the buyer before reselling goods received in part performance, his resale is subject to the conditions laid down in this division on resale by an aggrieved seller (section 2706).

Cross References. Section 2718 is referred to in sections 2316, 2601, 2719 of this title.