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.
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 ?
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.
Commercial factors play a part, and the agreement of a liquidated damages sum may well be the product of negotiation or be reflective of the parties' agreement as to risk allocation.
The duty to mitigate damages, therefore, impacts the amount of avoidable costs that a firm may be able to use to justify the liquidated damages clause-75% in the authors' prior example.
Where the parties to an agreement, whatever may be the subject-matter or the terms, have added a provision for the payment, in case of a breach, of a certain sum which is truly liquidated damages and not a penalty--in other words, where the contract stipulates for one of two things in the alternative, the performance of certain acts, or the payment of a certain amount of money in lieu thereof--equity will not interfere to decree a specific performance of the first alternative, but will leave the injured party to his legal remedy of recovering the money specified in the second.
(43) Some courts have also, or alternately, required that the liquidated damages not be substantially different from the actual loss, measured subsequent to the breach.
I recommend replacing the current system of punitive relief under Title VII with an approach similar to the damages provisions under the ADEA and FLSA, which currently provide for liquidated damages. (229) Under the liquidated damages scheme, an employer could be liable for "double damages" of the actual damages suffered by the plaintiff.
(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.
so long as liquidated damages are subject to the rule against penalties,
Construction contracts may call for "liquidated damages" in the event of a delay in completion.
Liquidated damages provisions in leases: Property owners and managers should focus their attention on risks associated with improperly drafted late fee provisions in their leases.