liquidated damages


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Related to liquidated damages: Unliquidated damages

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 ?
A liquidated damages provision stipulates that a predetermined amount of compensation shall be owed by a party who is in breach of a particular obligation to the other party.
Although not required for enforceability that a liquidated damages clause explain in its own language what it is that makes the damages so difficult to calculate, it is required that the damages actually be difficult to calculate at the time the parties execute the lease.
Such costs are avoidable, and therefore should not be considered when determining whether it is reasonable to measure liquidated damages by 75% of billings.
Rather, liquidated damages should be compared with real losses after the breach has occurred, and that comparison should determine the court's decision unless there is a reason to think that the liquidated-damages clause was deliberately intended to encompass the circumstances of the breach inquestion.
255) The liquidated damages provision, which would replace the maliciousness standard with the far simpler question of intent, would thus be significantly easier for the courts and juries to apply.
When considering liquidated damages clauses be careful to document the reasonableness of the amount and obtain the other parties' agreement to the amount.
Next, the court examined Montana law on the subject, finding that the statutory standard for liquidated damages was an outdated codification of the common law developments across the country and that Montana case law, starting with a construction contract related to the Big Sky ski area, reveals inconsistencies and disparities rather than a detectable and defensible rule.
A liquidated damages provision can be a useful tool, as it saves a great deal of time and money by eliminating the need to prove the actual amount of loss if a dispute or lawsuit arises.
As to the liquidated damages Schleier received, the Court rejected the notion that these damages were intended to compensate the plaintiff for personal injury.
In addition, liquidated damages are only appropriate where the actual amount of damages is difficult to determine.
Decision Addresses Enforceability of Liquidated Damages Provision