Damages of a stipulated amount as agreed upon in a contract. Liquidated damages
are often used in lieu of actual damages, especially in construction contracts.
For example, a contractor may be liable for $10,000 per day for each day required
to complete a project beyond the agreed-upon completion date. Liquidated damages
are not intended to be punitive and must have a reasonable correlation to anticipated
actual damages. Most contractors prefer liquidated damages provisions (as opposed
to being liable for actual damages) because they offer greater ability to quantify
Links for IRMI Online Subscribers Only: