Example of liquidated damages

A liquidated damages example would be a contractor that failed to complete a construction project on time and is charged daily until the project has been finished.

1. What is meant by liquidated damages?
2. What is an example of liquidated damages clause in construction?
3. What is a typical liquidated damages clause?
4. What is the difference between liquidated and unliquidated damages?

What is meant by liquidated damages?

Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract.

What is an example of liquidated damages clause in construction?

For example, the parties might agree that the contractor will owe the owner $500 per day in damages if the substantial completion date is not achieved. (Often the amount is greater than $500.) Thus, if construction were delayed for two days, the contractor would owe $1,000 in liquidated damages.

What is a typical liquidated damages clause?

A contractual provision requiring a party in breach to pay a pre-determined amount to the other party as compensation for the breaching party's failure to perform a specific task or comply with a particular duty or obligation.

What is the difference between liquidated and unliquidated damages?

A liquidated damages clause (or an agreed damages clause), is a provision in a contract that fixes the sum payable as damages for a party's breach. In comparison, unliquidated damages are damages for a party's breach which have not been pre-estimated.