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 distinction between liquidated damages and unliquidated damages is closely linked to this "penalty theory" of prejudgment interest.
1966) (holding tort claim for unliquidated damages did not justify dismissal for lack of jurisdiction).
On appeal, the Second Circuit reversed, holding that the district judge could not attempt to predetermine the value of an unliquidated damages claim, and therefore federal diversity jurisdiction was proper.
In Broward County, determining common law unliquidated damages for a violation of civil rights, a cause of action which did not exist at common law, was held to be a "purely judicial function." Bonanno held that determining "just compensation," by its very nature unliquidated, for a taking is not a fundamental judicial function, even though the right to just compensation exists in the Constitution and at common law, albeit without a right to a jury trial.(31) The troubling aspect of these cases is that the court thought its direct oversight more important in cases arising under a county ordinance than in cases involving a right imbedded in the Constitution.
[c]ommon law undeniably recognized actions for unliquidated damage awards.