Q&As

Where you have a liquidated damages clause in relation to breaches concerning delivery (and there is no waiver in respect of the liquidated damages clause), does this clause prohibit you from seeking damages for other contractual breaches?

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Published on LexisPSL on 04/05/2017

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • Where you have a liquidated damages clause in relation to breaches concerning delivery (and there is no waiver in respect of the liquidated damages clause), does this clause prohibit you from seeking damages for other contractual breaches?
  • Liquidated damages clauses
  • Waiver
  • Contractual mechanisms for dealing with breach
  • Contractual interpretation

Where you have a liquidated damages clause in relation to breaches concerning delivery (and there is no waiver in respect of the liquidated damages clause), does this clause prohibit you from seeking damages for other contractual breaches?

Liquidated damages clauses

A liquidated damages clause is a clause whereby the parties to a contract fix in advance a sum of money to be paid by the defaulting party to the innocent party in the event of a breach.

Liquidated damages clauses tend to take one of two forms, either:

  1. the parties agree at the time of contracting that, in the event of a breach, the party in default must pay a stipulated sum of money to the other, or

  2. they agree that in the event of a breach the party in default will forfeit a sum already paid to the other

An analysis of any liquidated damages clause will usually involve determining whether the purported liquidated damages clause exceeds the boundaries of a 'genuine pre-estimate of loss' (enforceable) and is, in fact, a penalty and thus unenforceable. See Commentary: Damages for breach may be stipulated by the terms of the contract itself, subject to rule against penalties: Halsbury’s Laws of England [549], Practice Note: Contract interpretation—distinguishing between liquidated damages and penalty clauses and Liquidated damages v penalty clause—checklist.

If the liquidated damages provision in

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