## Facts

- Albert M. Pacheco enrolled his son in Camp Wekeela, operated by Eric and Diane Scoblionko, after prior years of attendance.
- For the 1985 season, Pacheco paid the full $3,100 tuition before February 1, 1985 to obtain an early-payment discount and signed the camp’s preprinted registration contract.
- The contract stated that if notice of withdrawal was received after May 1, the camp would retain “the amount paid” as liquidated damages.
- On June 14, 1985, Pacheco learned his son had failed a Spanish final exam and would be required to attend summer school; he promptly notified the camp by phone and requested a refund.
- The camp refused to refund any portion of the $3,100, citing the withdrawal clause.
- After a bench trial, the Superior Court ruled for Pacheco, concluding the clause was an unenforceable penalty and ordering a full refund plus interest and costs.
- The Scoblionkos appealed.

## Issues

1. Whether the contract provision allowing the camp to retain all prepaid tuition upon withdrawal after May 1 was enforceable as liquidated damages or void as a penalty.
2. Whether Pacheco’s recovery should be reduced for failure to mitigate.
3. Whether any alternative theories of recovery affected the judgment.

## Decision

- The court affirmed the judgment for Pacheco.
- The court held the forfeiture provision was an unenforceable penalty rather than a valid liquidated-damages clause.
- The court upheld an award requiring repayment of the full $3,100, plus interest and costs.
- The court rejected the mitigation argument as a basis to reduce recovery on this record.
- Because the penalty ruling supported the judgment, the court did not rely on other asserted theories of recovery.

## Legal Principles

- A liquidated-damages clause is enforceable only if, at the time of contracting, (1) actual damages would be difficult to ascertain and (2) the stipulated amount is a reasonable forecast of probable loss.
- Contract language labeling a sum “liquidated damages” is not controlling; courts assess whether the clause reasonably relates to anticipated harm.
- A clause that deters breach by imposing a sum disproportionate to probable loss operates as a penalty and is unenforceable.
- When a forfeiture clause is invalid as a penalty, the payer may recover the amount retained under the invalid provision, and mitigation principles do not necessarily reduce that restitutionary recovery absent a record requiring it.

## Conclusion

The Maine Supreme Judicial Court affirmed a full refund of prepaid camp tuition because a contract term requiring total forfeiture for post–May 1 withdrawal was not a reasonable estimate of probable loss and therefore functioned as an unenforceable penalty.


Pacheco v. Scoblionko, 532 A.2d 1036 (Me. 1987)