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Remedies • Contract - Legal Remedies
REM#046
Legal Definition
If the amount of a liquidated damages provision is excessive, it will be void as a penalty, and only actual damages are recoverable.
Plain English Explanation
If a court finds out that your liquidated damages clause was actually a sneaky attempt to slip a punitive damages clause into a contract, they are likely to void it since punitive damages aren't allowed.
Hypothetical
Hypo 1: Bob rents Sam's beach house for the summer. The contract has a liquidated damages clause that says if Bob breaks a vase, he pays $10,000. However, the actual cost of the vase is only $50, and it's easy to determine this value. Result: The liquidated damages clause wouldn't apply here because the damages (cost of the vase) are easy to determine and the pre-decided amount is not a reasonable forecast of the damages. Moreover, this seems more like an attempt to sneak in punitive damages, which are not allowed in contract disputes.
Visual Aids
Related Concepts
In assessing contract legal remedies, are nominal damages permitted?
In assessing contract legal remedies, are punitive damages permitted?
In assessing contract legal remedies, what are compensatory damages?
In assessing contract legal remedies, what are consequential damages?
In assessing contract legal remedies, what are expectation damages?
In assessing contract legal remedies, what are incidental damages?
In assessing contract legal remedies, what are liquidated damages and when are they permissible?
What are legal remedies in contract?
What elements are required to prove legal remedies in contract?
