Liquidating damages clause

One last thing to consider is why there was delay in the first place.

Even if you have a valid liquidated damages provision in your contract, you may not recover under it.

While the freedom to bargain for and agree upon terms is a bedrock of contract negotiations, the law of liquidated damages puts some limits on this freedom. Despite the parties’ apparent agreement to include a liquidated damages clause in their contract – after all, it was in their contract -- the party seeking to enforce the clause could not offer a reasonable explanation of the liquidated damages amount was calculated.

On this basis, the court rejected the provision, saying it was not reasonable and calling it a penalty. Remember, whether the liquidated damages are reasonable is not affected by the amount of actual damages incurred because the analysis is based on the circumstances existing at the time the parties enter the contract.

As liquidated damages clauses are essential to compensate principals to construction contracts, it is important that they are drafted with proper consideration and are ultimately enforceable.Should you include a liquidated damages provision in your contract?If you have such a clause in your contract, and completion of the project has been delayed, will it give you the relief you seek?[2005] TASSC 133 A contractor to a construction contract failed to complete the works by the completion date.Therefore, the principal withheld from the contractor liquidated damages at a rate of ,000 per day for each day until completion.

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