7.6. Liquidated Damages & Penalties

Try these first

1. 1.

   What is meant by liquidated damages?

   Hint

   Think about how contracts foresee possible issues.

2. 2.

   Are penalties generally enforceable?

   Hint

   Recall the distinction between fair compensation and punitive measures.

3. 3.

   What are liquidated damages?

   • Punitive charges
   • Pre-agreed sums for loss
   • Legal fees

   Hint

   Remember that they are meant to estimate loss.

4. 4.

   True or False: Penalty clauses in contracts must always be enforced.

   • True
   • False

   Hint

   Think about what penalties represent.

5. 5.

   A construction contract includes a clause for liquidated damages of $5,000 for any delay in delivery. However, a judge deems this excessive since the actual anticipated loss was only$1,500. Discuss the implications for the enforceability of the clause.

   Hint

   Consider how courts view fairness in contracts.

6. 6.

   Differentiate the application of liquidated damages and penalties in a technology licensing agreement that includes both types of clauses. Analyze potential legal risks involved.

   Hint

   Think about how terms are defined concerning penalties and agreements on liquidated damages.