A liquidated damages clause specifies a predetermined amount of money that must be paid as damages for failure to perform under a contract. Liquidated damages are a fact of life when it comes to construction contracts. Is there a legal limit to the maximum amount of Liquidated Damages to be applied? Moreover, liquidated damages must be a reasonable attempt to approximate the actual damages. When there is a breach of contract, it … The whole idea of liquidated damages is that it is a pre-estimated amount which the parties have agreed shall be paid on the occurrence of some event. We are not aware of any legally imposed limit on Liquidated Damages. Using a liquidated damage provision is the easiest way for an owner to calculate the losses that they can recover if a project is not completed on time. Use a maximum amount or a maximum period for assessing liquidated damages if these limits reflect the maximum probable damage to the Government. Liquidated damages cannot be a penalty for the agency to club the contractor into compliance with punchlist, warranty, paperwork or other requirements that do not affect the use of the project as contemplated by the contract. What Are Liquidated Damages? Liquidated Damages (LDs) are treated very differently across the Gulf region and from the position as understood within the English common law jurisdiction. Example: Amount of Liquidated Damages shall not exceed 10% of the contract value. An enforceable liquidated damages clause precludes the recovery of any other damages even if such damages are not covered by the liquidated damages clause. still deduct liquidated damages? These damages will be charged on a daily basis until the project is finished. Therefore, the liquidated damages rate must be a reasonable forecast of just compensation for the harm that is caused by late delivery or untimely performance of the particular contract. [67] Where a contract expressly provides a party can recover both liquidated and actual damages, the liquidated damages provision will be unenforceable. We are preparing a contract for construction of an aircraft maintenance hangar. Liquidated damages are predetermined penalties assessed against importers that have violated the conditions of their Customs bond. Use a maximum amount or a maximum period for assessing liquidated damages if these limits reflect the maximum probable damage to the Government. Basics of Liquidated Damages. It should include a clause that sets out the specific amount of damages you are to receive if a specific type of breach occurs. Therefore, the liquidated damages rate must be a reasonable forecast of just compensation for the harm that is caused by late delivery or untimely performance of the particular contract. 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