[JumpCrisscross]

> this is extremely rare for us, but it has happened a couple of times

Put punitive terms into your SLA. (Though check with a lawyer about adhering to your merchant agreement.)

Charging back doesn’t cancel a contract. If you want to be vindictive, you could sell the debt to a collector.

[singleshot_]

Restatement (Second) Contracts sec. 356 would seem directed squarely at this bad idea.

[JumpCrisscross]

It constrains liquidated damages to a reasonable figure. But it doesn’t prevent them. As for selling a debt to a collector, that seems perfectly reasonable, particularly if the customer made no effort to cancel.

[singleshot_]

I am acutely aware that it constrains liquidated damages to a reasonable figure. Conveyance to a collector is, of course, customary in the trade.

The problem is that a “punitive” amount of liquidated damages is neither reasonable, nor would it typically be found to have been the product of an actual estimate of the damages. See, 356 cmt. a.

If you didn’t say “punitive” in the LD provision, you’d have the “reasonable estimate” conversation but GP straight up called it a punitive clause, which is not going to fly (in many jurisdictions, ianyl, etc. etc.)

[JumpCrisscross]

> a “punitive” amount of liquidated damages is neither reasonable, nor would it typically be found to have been the product of an actual estimate of the damages

Would note that the Restatement isn’t law, but an influential guideline. As long as the punitive terms are clearly agreed to, they ought to be able to fly. (Particularly if made in exchange for money, e.g. pay a premium to opt out of punitive cancellation.)