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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.
A collateral contract is usually a single term contract, made in consideration of the party for whose benefit the contract operates agreeing to enter into the principal or main contract, which sets out additional terms relating to the same subject matter as the main contract. [1]
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 ...
Liquidated damages are an estimate of loss agreed to in the contract, so that the court avoids calculating compensatory damages and the parties have greater certainty. Liquidated damages clauses may serve either a compensatory or a punitive purpose and, when aimed at the latter, may be referred to as "penalty clauses".
Damages may include the cost to repair or complete the work in accordance with the contract documents, or the value of lost or damaged work. [4] In addition to the compensatory damage, an owner can also seek for consequential damages (sometimes referred to as "indirect" or "special" damages), which include loss of product and loss of profit or ...
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.