Liquidated damages are mainly used for late completion of works and are also sometimes used to compensate employers for failure to meet specified performance targets.
This section is maintained by David Johnson of Boodle Hatfield Ltd.
Present in certain legal contracts, this provision allows for the payment of a specified sum should one of the parties be in breach of contract.
A liquidated damages clause in contract specifies a sum of money that will be payable as damages if a party breaches a particular term of the contract.Generally, contracts that involve the exchange of money or the promise of performance have a liquidated damages stipulation. The purpose of this stipulation is to establish a predetermined sum that must be paid if a party fails to perform as promised. For example, cases such as Colonial at Lynnfield v. When, from the nature of the case, and the tenor of the agreement, it is clear, that the damages have been the subject of actual and fair calculation and adjustment between the parties.