Liquidated Damages Are Essentially a Variation on Actual Damages
Video Transcribed: Tulsa Construction Attorney Brian Carter with Tulsaconstructionlawyer.com, and I just wanted to take a few minutes to discuss a couple of things that should be taken into consideration whenever entering into a contract with a liquidated damages clause.
Liquidated damages are essentially a variation on actual damages and they’re often used when actual damages would be hard to calculate. But from a contracting perspective, one wants to be mindful that they’re not signing or agreeing to something that is inequitable.
Otherwise, the risks are not being accurately allocated. This would be a one-sided situation where the risk far outweighs the reward. It’s important to know what you’re signing.
Liquidated damages should also not be viewed as a punishment, but more as a compensation for loss, even though it can have the same feel as a punishment.
Clauses that are lopsided or favor one party more than the other can oftentimes be considered or deemed unconscionable, but it’s best to avoid those situations in the beginning. Liquidated damages can become a problem if a contracting party is not aware of what they’re signing and end up having a problem.
So, those are a couple of considerations that anyone entering into a contract with liquidated damages should take into consideration. Thank you. Brian Carter, Tulsaconstructionlawyer.com.