Contracts: Remedies: Monetary: Liquidated Damages

• Liquidated damages: Liquidated Damages Clause is in the contract to set what the damages will be in the event of a breach. It’s permissible if damages were difficult to estimate and the provision is a reasonable forecast of probable damages.

• Look to see if the clause is enforceable on its face, or whether it involves an impermissible penalty.

• If damages are flexible and graduated (per diem), they are okay. Also consider whether they are common in the industry. (i.e. in construction contracts for missing a deadline).
• 1 size does not fit all. There must be proportionality. A fixed figure is not valid.