For example, the pre-set liquidated damages amount must be a estimation of the damages that would occur in the event of a breach.If the stipulated amount is not reasonably related to the potential damages, then it will be considered a penalty, and it will be unenforceable. Even if both parties agree to include the clause in their contract, it may not be enforceable.Let’s take a look at some factors that will help you figure out the value of a liquidated damages clause. In general, liquidated damages are an amount of predetermined, stipulated compensation to be recovered upon the occurrence of a particular event.They are often associated with delays on a project.The purpose of having a liquidated damages provision is to establish a pre-set amount of payment to address circumstances where damages are hard to determine or otherwise difficult to prove.Why would you include a liquidated damages provision in your contract?
If you have such a clause in your contract, and completion of the project has been delayed, will it give you the relief you seek?
In contrast, in the UAE and Qatar, the distinction between a delay penalty and a liquidated damages provision does not have the same significance.
A different approach The literal translation of “liquidated damages” in Arabic is “fines”.
FTA has not published a definition of liquidated damages, but the definition that is included in the glossary of terms used by the National Transit Institute (NTI) in the courses that they teach on behalf of FTA is as follows: A specific sum (or a sum readily determinable) of money stipulated by the contracting parties as the amount to be recovered for each day of delay in delivery of the product or completion of the contract.
The Best Practices Procurement Manual (BPPM) has a discussion of liquated damages in Section 8.2.3.
Generally, a liquidated damages clause in the contract allows for the payment of a fixed sum for which a party to the contract is liable upon the breach of that contract.