liquidated damages

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Liquidated damages

The amount payable for delays and sub-standard performance under a construction, equipment supply, or Operations & Maintenance contract.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
The Court of Appeal rejected this argument and highlighted that the court was not allowed to apply liquidated damages clauses after the termination of a contract.
2008].) But if the amount of actual damages that would probably be suffered by the firm is readily ascertainable when the contract is made, or the amount fixed as liquidated damages is conspicuously disproportionate to the foreseeable loss, the liquidated damages clause will not be enforced; instead, it will be characterized as a penalty (Bates and Central Irrigation Supply).
Although it is common to hear courts admit that (as indicated in Section 361) courts may award specific performance despite an express transfer term where the transfer is "intended to be mere security for the performance of the principle [sic] obligation," courts nevertheless insist that "where the sum specified may be substituted for the performance of the act at the election of the person by whom the money is to be paid, or the act done, equity will deny specific performance." (51) Courts following this reasoning deny specific performance of the trade terms to a promisee whose promisor complied with a liquidated damages clause. (52) As Pomeroy's treatise on Specific Performance of Contracts observes:
(53.) Goetz & Scott, supra note 4, at 578 ("In the absence of evidence of unfairness or other bargaining abnormalities, efficiency would be maximized by the enforcement of the agreed allocation of risks embodied in a liquidated damages clause.").
[check] Check for and calculate the expected payout from a reimbursement or liquidated damages clause. In noncompete agreements with accounting firms, courts tend to favor an objective formula that is similar to the price a third party would pay to purchase the book of business.
a liquidated damages clause, but this was reversed at the Court of
(7) The contract contained a liquidated damages clause providing that if the contractor failed to complete the project on time, then the government would be entitled to damages in the amount of either $4,351 or $200 per day (depending up the line item number) for each day of delay.
capture some of these first-order harms in a liquidated damages clause.
Florida courts have uniformly held that "the Valued policy law is founded upon the theory of 'calculated risk,' while the pro rata insurance clauses are based upon the theory of "indemnity." (16) For this reason, the statute operates like a liquidated damages clause rather than as an indemnity contract.
Even with a liquidated damages clause in place, a claimant will still need to have experts examine complicated causation issues, such as interferences and concurrent delays, to determine how many days of liquidated damages should be awarded.
One way we have suggested to customers to get quality contractors is to include a liquidated damages clause of at least $2,500 per day in the contract, or something similar.