Q2) what are liquidated damages? Why to include a liquidated damages clause in the contract? Are...

Q2) what are liquidated damages? Why to include a liquidated damages clause in the contract? Are they enforceable? How to calculate the amount of liquidated damage?

Expert Solution

Liquidated damages, also referred to as "liquidated and ascertained damages" are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach.

An example, Liquidated damages might be paid out if one or more parties to the contract failed to perform their duties as expected. The amount determined in a liquidated damages clause is supposed to be a best estimate of the compensation that would be appropriate if the parties to the contract were to suffer a breach.so it is need to include in the contract.

No they are not enforcable.While liquidated damages provisions can have advantages, they are not always enforceable . If the predetermined amount of damages ends up grossly disproportionate to the actual harm suffered, courts will refuse to enforce the provision on the grounds that it is a penalty instead of an estimate of actual damages.

The CONTRACTOR hereby expresses covenants and agrees to pay to the Owner liquidated damages equivalent to the One-Tenth of One Percent (1/10 of 1%) of the Contract Price per calendar day of delay until completion, delivery and acceptance of the said Works by the OWNER to a maximum amount not to exceed 10%.

Thank you. Hope you understand. If you have any doubts comment me.

Ally Wells answered 9 months ago

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