Liquidated Damages

Liquidated Damages refer to a predetermined amount of money that a contractor agrees to pay to the client if specific contractual obligations, particularly regarding project completion deadlines, are not met. This clause is included in contracts to serve as a compensatory measure for the client in case of delays that are the fault of the contractor, providing a clear, agreed-upon sum as a form of compensation for breach of contract. The purpose of liquidated damages is not to punish the contractor but to compensate the client for losses incurred due to delayed completion, such as additional project management costs or lost revenue. They are calculated and agreed upon during the contract formation to ensure fairness and clarity for both parties.