What is an example of a liquidated damages clause?

An example of this would be how a contract for a university dorm rental may state: “Students who cancel their dormitory housing agreement after moving into their room shall pay liquidated damages amounting to $5.00/day for the remainder of the rental term (not to exceed $500.00).”

What is a liquidated damages clause in a construction contract?

Liquidated damages are an amount of money, agreed upon by the parties at the time of the contract signing, that establishes the damages that can be recovered in the event a party breaches the contract. The amount is supposed to reflect the best estimate of actual damages when the parties sign the contract.

What is a reasonable amount of liquidated damages?

For example, the amount must be reasonable. Liquidated damages are not designed to punish contractors, and thus cannot be an amount that could be considered excessive or punitive. For example, $20-$25 per day for each $100,000 of the contract price.

What is an example of a liquidated claim?

A liquidated claim is a claim for a specific amount of money that is owed under a contract or agreement. For example, as set out in an unpaid invoice, unpaid rent, bounced cheque, or unpaid loan.

How are liquidated damages clauses calculated?

A normal figure used for assessing liquidated damages is 0.5% per week of delay with a maximum of 2.5%. This means that the vendor’s maximum liability becomes operative after a 5 weeks’ delay and is limited to 2.5% of the contract value.

Are liquidated damages clauses enforceable?

Liquidated damages clauses are generally enforceable, but most courts will not enforce a liquidated damages provision if (1) it constitutes a penalty as opposed to a reasonable estimate of the actual damages likely to be incurred due to delay, or (2) the party benefitting from the liquidated damages clause is …

Where the liquidated damages are considered?

In most of the cases, the parties agree to liquidated damages in cases where calculation of the actual damages suffered by the non-breaching party is difficult or time consuming. Thus, the contracting parties agree to an amount deemed reasonable and a good estimate of such damages by them.

What is a liquidated damages claim?

Definition. Liquidated Damages are a variety of actual damages. Most often, the term “liquidated damages” appears in a contract, and often is the title for a whole clause or section. Parties to a contract use liquidated damages where actual damages, though real, are difficult or impossible to prove.