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In Australia, the definition of liquidated damages applies to the situations where upon the failure of a primary stipulation, imposes a detriment to the first party or a benefit to the second party by a secondary stipulation collateral to the primary stipulation (i.e. UK bank and credit card customers were being charged as much as £39 for a single transaction that took them over their credit limit.Consumers argued these charges were well beyond the cost of sending a computerised letter.There are many reasons why liquidated damages may not be enforced, but they generally involve just a few legal concepts: (1) Whether any damages actually were suffered; (2) Whether the prescribed liquidated damages meet minimum requirements for reasonableness; (3) Whether the contract language requires the all-or-nothing or apportionment-of-delay analysis; (4) Whether liquidated damages are barred by acts or omissions of the owner which prevented timely performance, amount to a waiver, or estop the owner from enforcing the liquidated damages provision.Actual Damages and Reasonableness Before there can be any liquidated damages, there have to be actual damages.The purpose of this stipulation is to establish a predetermined sum that must be paid if a party fails to perform as promised. Damages can be liquidated in a contract only if (1) the injury is either "uncertain" or "difficult to quantify"; (2) the amount is reasonable and considers the actual or anticipated harm caused by the contract breach, the difficulty of proving the loss, and the difficulty of finding another, adequate remedy; and (3) the damages are structured to function as damages, not as a penalty. A penalty is a sum that is disproportionate to the actual harm. If these criteria are not met, a liquidated damages clause will be void. It serves as a punishment or as a deterrent against the breach of a contract. "One View Too Many." Boston Bar Journal 34 (April).n.

In other words, since actual damages resulting from delay cease when the project is complete enough to perform its intended function and the agency takes possession and starts using it, then liquidated damages must also cease at this point.

For example, a builder who does not meet his or her schedule may have to pay a penalty. Sometimes the liquidated damages are the amount of a deposit or a down payment, or are based on a formula (such as 10% of the contract amount). The damages will be considered as liquidated in the following cases: 1.

Liquidated damages, on the other hand, are an amount estimated to equal the extent of injury that may occur if the contract is breached. The non-defaulting party may obtain a judgment for the amount of liquidated damages, often based on a stipulation (clear statement) contained in the contract, unless the party who has breached the contract can make a strong showing that the amount of liquidated damages was so "unconscionable" (far too high under the circumstances) that it appears there was fraud, misunderstanding or basic unfairness. By this term is understood the fixed amount which a party to an agreement promises to pay to the other, in case he shall not fulfill some primary or principal engagement into which he has entered by the same agreement it differs from a penalty. When the damages are uncertain, and not capable of being ascertained by any satisfactory or known rule; whether the uncertainty lies in the nature of the subject itself, or in the particular circumstances of the case.

Use liquidated damages clauses only when— (1) The time of delivery or timely performance is so important that the Government may reasonably expect to suffer damage if the delivery or performance is delinquent; and (2) The extent or amount of such damage would be difficult or impossible to estimate accurately or prove.

(b) Liquidated damages are not punitive and are not negative performance incentives (see 16.402-2).




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