liquidated damages

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Related to Liquidated damages clause: Penalty clause

Liquidated damages

The amount payable for delays and sub-standard performance under a construction, equipment supply, or Operations & Maintenance contract.

Liquidated Damages

In some contracts, a set fee that one party must pay the other in cases of breach of contract. The amount of the liquidated damages is stated in the contract and is designed to compensate the grieved party when valuation of the breach would be difficult to ascertain.

liquidated damages

Damages agreed upon in advance by contracting parties.The parties will recite that if one or the other breaches the contract, it will be difficult to determine damages at that time.This is often true in situations where construction is delayed and a business cannot open on time or homeowners cannot take possession of their home when anticipated. Liquidated damages are used in a wide variety of cases, though, not just construction contracts.The parties will agree to an amount of damages, or a method of calculating damages, such as a certain amount per day. Most real estate sale contracts stipulate the earnest money deposit as the amount of liquidated damages.The catch with this system is that courts will not enforce penalties, which are illegal.If the liquidated damages do not bear some relationship to reality and the probable damages suffered by the innocent party, then courts will recharacterize them as penalties (completely unenforceable) or will reduce them to an amount deemed reasonable under the circumstances.

References in periodicals archive ?
Review of every single reported liquidated damages clause of the past 100 years revealed their wide New York acceptance as they advance both these goals as well as the overarching goal to encourage people to abide by their contractual obligations.
If parties fail to consider the legal standard of enforceability and the economic components of an enforceable liquidated damages clause, they might be surprised when it comes time to seek enforcement of the clause in the New York State courts.
For example, a Florida case holding that "[a] provision for liquidated damages in a contract does not necessarily bar injunctive relief against its breach" adds, in the next sentence, "If, however, it appears that the liquidated damages clause was intended to furnish a party the alternative of performance or payment or was to be an exclusive remedy, an injunction will not be issued.
even if a damages clause is not a liquidated damages clause in the
This article reviews the application of a liquidated damages clause to an employment restrictive covenant agreement and emphasizes how practitioners can draft enforceable clauses for their business clients' protection.
Another alternative is to use a modified liquidated damages clause that includes some sort of cap, either at a specific dollar amount or a specified percentage of the contract price.
Shortly thereafter, upon consulting with family members who advised him that the liquidated damages clause was not enforceable, he stopped payment on the check.
The amount of liquidated damages agreed on must be reasonable; otherwise the courts will not enforce the liquidated damages clause.
In the United States, a contract clause stipulating the amount of damages to be paid in the event of a breach may be considered either as a liquidated damages clause or a penalty clause.
Because there was a liquidated damages clause that would limit KLP's loss to the deposit plus monthly damages if it defaulted, the Tax Court viewed the $900,000 payments as resembling amounts paid to retain the"option to complete or not complete the transaction.
If an agreement is broken a liquidated damages clause makes monetary recovery more likely.
For example, a lease preventing a tenant from opening another store within two miles of the leased premises and providing that if the tenant did so in spite of the prohibition, then 100 percent of the gross sales at the other store would be included as gross sales from the leased premises for purposes of calculating percentage rent, may be an unreasonable and therefore unenforceable liquidated damages clause.