In a construction contract, there is a $1000 per day estimate of damages for each day that the contract runs over the completion date. The contractor is 30 days late when the job is completed, resulting in a prospective damage award of $30,000 . What is this type of clause, and when will it be enforced?
This type of clause is known as a liquidated damages clause. Generally this type of clause will be enforced if, at the time of creating the contract, it was very difficult to estimate actual damages, and the liquidated amount is reasonable. In this case, if the total construction contract involved millions of dollars, the estimate of damages may reasonably amount to a $1000 per day. If the construction project is a small one, the court may see this amount as too much and not enforce the clause.
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