What is a Liquidated Damage Provision?
A contract is a written agreement between two or more parties each agreeing to certain things. When a party fails to perform under the contract, Florida law allows non-breaching parties to recover compensation from any damages incurred.
Liquidated damages pay a specific amount of money agreed upon by the parties in the event there is a breach of contract. The parties should include a properly drafted clause specifying the amount for damages when forming the contract to ensure it will be legally valid in the Florida courts. Both parties will have the opportunity to settle on an amount they think is fair saving time and money by not having the courts make the decision.
What Makes a Liquidated Damages Clause Enforceable?
Liquid damage provisions are advantageous when enforceable They can act as a type of insurance in the event there is a breach of contract. If a breach of contract occurs and the non-breaching party sustains a financial injury, they will want to obtain legal advice to learn about their options for recovering the monetary damages.
Contract penalties are generally not enforceable because if the courts consider the clause to be a penalty, they will deem it invalid. If the estimated damages are disproportionate to the actual costs, the courts will refuse to enforce the provision.
Liquidated Damage Provisions Must Be:
- Reasonably estimated. If the clause is random or overly generous, the provision will not be enforced.
- Uncertain. A liquidated damage provision can be complicated to value. For example, lost sales could not be predetermined.
Paul J. Burkhart
Paul J. Burkhart is an experienced business attorney who demands accountability and corporate integrity. If you are in the formation stages of a business contract, Paul J. Burkhart can help with adding a liquidated provision that will hold up in a Florida court of law.
Our team assists both individuals, and business clients with all their legal needs, including business and Corporate Transactions, Business/Commercial and Civil Litigation, Real Estate, Intellectual Property, Family Law, and Estate Planning matters. We are a full-service private law firm ready to assist you with any request, large or small. Call 561-880-0155 or visit our website.
Law Offices of Paul J Burkhart, PL
800 Village Square Crossing
Palm Beach Gardens, FL 33410
Phone: (561) 880-0155
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