Is a $1,500 'No-Show' Penalty in a 1099 Contract Enforceable?

Attorney Answer

Utah starts from a presumption that a contract's stated charge for non-performance is enforceable — so the real question is not whether $1,500 was a reasonable forecast of the company's loss, but whether the clause fails on ordinary contract grounds such as unconscionability.

Contracts can set a fixed sum owed if one side does not perform. Utah used to test those clauses more suspiciously than other contract terms, but it no longer does. In Commercial Real Estate Investment, L.C. v. Comcast of Utah II, Inc., 2012 UT 49, 285 P.3d 1193, the Utah Supreme Court — binding on every Utah court — discarded the competing approaches its earlier cases had used, including the penalty inquiry, the 'shock the conscience' comparison of the stated sum to actual damages, and the two-part Restatement test asking whether the sum was a reasonable forecast of a loss that was hard to estimate. It held that liquidated damages clauses are not subject to any form of heightened judicial scrutiny and should be reviewed in the same manner as any other contractual provision: starting from a presumption of enforceability, and set aside only on ordinary contract grounds — principally unconscionability, measured as of the time the contract was formed. The party challenging the clause carries the burden.

That does not mean a wildly disproportionate charge is untouchable. Comcast folded the old penalty concern into the unconscionability analysis, so a sum far out of line with anything the company could realistically have lost can still be attacked — it simply has to be attacked as unconscionable, and the burden is on you rather than on them.

Unconscionability is therefore the main route here, not a side angle. If the clause was buried in fine print, heavily one-sided, or presented to you to sign quickly with no real opportunity to negotiate, that supports a challenge to the term.

One fact still matters a great deal: you never started. A company that has not yet relied on you, trained you, or turned away other work is unlikely to have suffered a loss anywhere near the amount stated, and that gap is evidence you would use to argue the term is unconscionable — under the current framework it is not, by itself, a freestanding reason to call the charge an unenforceable penalty.

What you can do

1. Re-read the exact clause. What it is labeled — penalty, liquidated damages, or fee — does not control, but the operative wording does. 2. Ask the company in writing what specific loss the charge is meant to cover, given that no work was ever performed. 3. Do not pay it, and do not sign anything acknowledging that you owe it, until the clause has been reviewed. 4. If they attempt to collect or refer it to a collection agency, dispute it in writing rather than ignoring it. 5. Consult a Utah contracts attorney about whether the clause is enforceable and how to respond.