liquidated damages

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Related to Liquidated damages clause: Penalty clause

liquidated damages

A sum specified in a contract whereby damages in the event of breach are to be determined. In a construction contract, liquidated damages usually are specified as a fixed sum per day for failure to complete the work, 1 within a specified time. If set at a level consistent with a reasonable forecast of actual harm to the owner, liquidated damage clauses will be upheld and will preclude use of standards for computation of damages that would otherwise be imposed by law. If the amount prescribed for liquidated damages is unreasonably high, the provision will be denominated an illegal “penalty” by the courts and held invalid; in such case, damages will be determined pursuant to otherwise applicable rules of law.
References in periodicals archive ?
Review of every single reported liquidated damages clause of the past 100 years revealed their wide New York acceptance as they advance both these goals as well as the overarching goal to encourage people to abide by their contractual obligations.
Chief amongst these mechanisms are liquidated damages clauses that seek to give to an event of breach of the contract at an unpredictable time with unpredictable consequences, certain quantification.
the enforceability of a liquidated damages clause, as the measure of
In noncompete disputes, an enforceable and well-drafted liquidated damages clause solves a number of problems.
A liquidated damages clause can reduce the amount of discovery directed at third-parties, a tactic frequently used to drive a wedge between the former employer and its customers.
A few courts have held that whether a clause calling for the payment of a fixed sum in the event of a breach is a liquidated damages clause or a penalty clause depends on the intent of the parties.
Some courts will uphold a provision as a liquidated damages clause only if the damages resulting are uncertain or difficult to ascertain.
The court is likely to uphold a liquidated damages clause which it finds to be "reasonable" and not excessive.
When considering liquidated damages clauses be careful to document the reasonableness of the amount and obtain the other parties' agreement to the amount.
To augment noncompete provisions, more and more organizations are using liquidated damages clauses, in which a specified measure of sustained financial damages, as a result of a terminating physician's actions, are stipulated.
The Letter of Intent includes no-shop provisions, break-up fees and liquidated damages clauses customary to such transactions.