Liquidated Damages: Be Sure You Get What You Bargained For


Liquidated damage clauses can be an effective way to handle the uncertainty of delay damages in construction projects. To be valid, they typically must satisfy a two-part test, and they should not act as a penalty. For maximum effect, they should be as specific as possible and accompany an exclusive remedy provision.

Like so many other contract provisions, liquidated damage clauses are deal points to be negotiated. If one is agreed upon, parties should take care in their contract drafting to be sure it is actually enforceable.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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