Damage Clause

In circumstances in which it is impossible to identify the real damages sustained, liquidated damages are intended to serve as a reasonable depiction of those losses. In most cases, the goal of the calculation of liquidated damages is to be equitable rather than punitive. It is possible for a particular clause in a contract to make reference to liquidated damages as a means of compensating for situations in which one of the parties to the agreement suffers a loss of assets that do not have a direct monetary correlate. Liquidated damages could apply, for instance, in the event if one of the parties to a contract were to divulge price quotes for a distribution network that was extremely important to a company.

It is likely that the courts will not enforce a liquidated damages clause if it is included in the contract. This can happen if the monetary amount of liquidated damages referenced in the stipulation is extremely disproportionate to the purview that was impacted by the breached contract. For example, if the clause states that the amount of liquidated damages will be $20,000, but the contract breach caused $20,000 in damages. Because of these constraints, it is impossible for a plaintiff to make an unjustified claim for an excessive sum of money from a defendant. For instance, if the security breach only affected a particular part of the plaintiff’s business, the defendant may not be able to recover monetary damages that amount to multiples of the gross income that the business generated. When a contract is made, the parties are required by the courts to make an evaluation of the liquidated damages clause that is as reasonable as feasible. This assessment must take place before the contract is signed. This may provide a sense of comprehension as well as comfort of what is at stake in the event that a particular provision of the contract is breached. In addition, the existence of a liquidated damages clause might provide the parties concerned with a foundation upon which to negotiate an out-of-court settlement.

When there is a breach of the law that results in harm or injury to another person, there are three primary categories of punitive damages (which are given in the form of money) that the plaintiff has the right to seek and that a judge has the discretion to award:

·         Causes damage to the economy in order to recoup money or even other forms of financial loss
·         damages that do not take into account economic factors and are intended to compensate the victim for ou pas losses, such as physical or mental injury
·         The offending party may be required to pay punitive damages as an additional form of punishment.