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?

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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 2 months ago

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