Harry Litman, a former federal prosecutor, says Stormy Daniels shouldn’t worry about having to pay millions of dollars to the President even if the now-infamous non-disclosure agreement isn’t set aside:
Take the case of Stormy Daniels, the porn actress who says she had an affair with Trump in 2006. Trump lawyer Michael Cohen said he negotiated an agreement with Daniels in October 2016 in which he paid her $130,000 and required she not disclose any details of the alleged affair or otherwise disparage Trump. The “hush agreement,” as Daniels aptly calls it, is backed by a so-called “liquidated damages” provision, which purports to require she pay $1 million for any and all breaches.
[…]Trump and Cohen’s Bronx bluster notwithstanding, the “liquidated damages” clause in Daniels’s hush agreement is a far less potent tool then they want her to believe. Indeed, it is not enforceable.Contract law is pragmatic: It permits actual damages for breach, but not punishment. The breaching party is responsible for making the non-breaching party whole — nothing more.There is a legitimate place in a contract for the “liquidated damages” clause. For some contracts, it is very hard for the parties to determine in advance the fair measure of damages in the event of a breach. In such a setting, the parties can include a clause that sets out what the damages will be.
However, and crucially, the set amount must be a reasonable forecast of the anticipated or actual harm from a breach. A party cannot simply name an arbitrary, exorbitant figure as the presumed “damages” from a breach, even if the other party agrees. If the law were otherwise, the breaching party would be locked in even when performance was inefficient or unfair, and the non-breaching party would reap a windfall.When courts see a party using a liquidated damages clause to punish or deter a breach, they will condemn it as a “penalty” and strike it out of the contract.