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Liquidated damages, also referred to as liquidated and ascertained damages (LADs), [1] are damages whose amount the parties designate during the formation of a contract [2] for the injured party to collect as compensation upon a specific breach (e.g., late performance). [3] This is most applicable where the damages are intangible.
Under common law, a liquidated damages clause will not be enforced if the purpose of the term is solely to punish a breach (in this case it is termed penal damages). [23] The clause will be enforceable if it involves a genuine attempt to quantify a loss in advance and is a good faith estimate of economic loss.
Liquidated damages; Liquidated damages refer to a predetermined amount of money that must be paid by the breaching party, and they are fixed numbers agreed upon by both parties during the formation of a contract. Courts enforcing a liquidated damages provision would consider the reasonableness of its amount, specifically if it approximates the ...
There are six classifications of damages which are compensatory, consequential, punitive, incidental, nominal and liquidated damages. [14] The objectives to fulfil the remedies is to make the plaintiff or suffering party not to suffer, the law allows several damages or compensation to cover the losses by the injured party. [14]
Penal damages are liquidated damages which exceed reasonable compensatory damages, making them invalid under common law.While liquidated damage clauses set a pre-agreed value on the expected loss to one party if the other party were to breach the contract, penal damages go further and seek to penalise the breaching party beyond the reasonable losses from the breach. [1]
Other than pecuniary damages, which is the most common type of damages recovered, there are a few other recognizable types of damages under English law, and still others that have their validity subject to ongoing debate: Injured feelings and disappointment; Injured reputation; Speculative damages; Liquidated damages and penalty; Quantum meruit [4]
The amount of statutory damages can be set on a per-incident basis, such as in the Fair Debt Collection Practices Act, which gives statutory damages of up to $1,000 for a violation of its provisions. [2] Amounts could also be set per day, as in acts proscribing human-rights violations which might specify damages of $1,000 per day. [3]
The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage. It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be ...