This decision involved the “propriety of a liquidated damages provision” (damage provision) in a landlord-tenant “surrender agreement” (agreement). The New York Court of Appeals held that the agreement is “an unenforceable penalty in contravention of public policy.”

The plaintiff landlord and the defendant supermarket tenant had entered into a 15-year lease. In year 13 of the lease period, the tenant facing “financial difficulties,” entered into the agreement that “terminated the lease in exchange for (tenant’s) surrender of the premises and a staggered payment of $261,751.73.”