Liquidating damages clause dating herritage guitars
Let’s take a look at some factors that will help you figure out the value of a liquidated damages clause. In general, liquidated damages are an amount of predetermined, stipulated compensation to be recovered upon the occurrence of a particular event.They are often associated with delays on a project.There are a few reasons that come to mind: It pays to be careful when drafting a liquidated damages clause.Just because your contract has a “LIQUIDATED DAMAGES” section, it does not mean that it is a valid clause or that you will recover under it.The Court found that the liquidated damages sum was a penalty because it did not compensate the developer for the relevant breach (ie.delay) as the delay was incapable of causing any relevant financial loss.Accordingly, the following factors are relevant to determining what is reasonable under the circumstances: In one case involving the construction of a church, the pastor of the church testified that the amount of liquidated damages, 0.00 per day, related to the anticipated loss of donations or offering, tuition for a private school affiliated with the church, and the increased costs of building the church as time progressed.When considering whether to award liquidated damages, the court found that these factors supported the liquidated damages amount.
Why would you include a liquidated damages provision in your contract?
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.
For example, the pre-set liquidated damages amount must be a estimation of the damages that would occur in the event of a breach.
If the stipulated amount is not reasonably related to the potential damages, then it will be considered a penalty, and it will be unenforceable. Even if both parties agree to include the clause in their contract, it may not be enforceable.