Unenforceable penalty objection to contractual liquidated damages provision must be pleaded as an affirmative defense

An assertion that a contractual liquidated-damages provision is an unenforceable penalty is an affirmative defense. Phillips v. Phillips, 820 S.W.2d 785, 789 (Tex. 1991); Magill v. Watson, 409 S.W.3d 673, 679 (Tex. App.—Houston [1st Dist.] 2013, no pet.).

Unless it is apparent from the face of the plaintiff’s petition that the provision is a penalty, the defendant must plead the defense or it is waived. See TEX. R. CIV. P. 94; Phillips, 820 S.W.2d at 789–90. Moreover, the defendant cannot raise this affirmative defense for the first time on appeal even if it is apparent from the face of the plaintiff’s petition that the liquidated-damages provision is an unenforceable penalty. See Phillips, 820 S.W.2d at 790; Excela Energy v. Exalt Real Estate Grp., No. 14-16-00388-CV, 2017 WL 2292586, at *2–3 (Tex. App.— Houston [14th Dist.] May 25, 2017, pet. denied) (mem. op.).

Source: First Court of Appeals, NO. 01-18-00027-CV - 10/30/2018
TYHAN, INC. D/B/A AUTO FIX UNLIMITED V. CINTAS CORPORATION NO. 2

Tyhan did not challenge that the contract’s liquidated-damages provision as an unenforceable penalty either in its answer or in its response to Cintas’s summary judgment motion. Tyhan raised this issue for the first time in its appellate brief. Tyhan therefore has not preserved this issue for review. See Phillips, 820 S.W.2d at 790; Excela Energy, 2017 WL 2292586, at *2–3.