Liquidated Damages Clause Example

by Brian Rogers on December 22, 2012

in Sample Contract Language

People often come to the blog looking for a sample liquidated damages clause. Although I have a nice little piece explaining liquidated damages provisions and cautioning people to avoid including penalty provisions in their contracts, I haven’t provided sample language.

Liquidated damages clauses should be tailored to the specific situation — this is particularly important because courts won’t enforce penalty provisions. Thus, it’s important that (1) your clause not in fact be a penalty provision and (2) the liquidated damages clause clearly reflect an attempt to compensate the non-breaching party.

Here’s a sample provision modified from Stephen R. Guth’s sample hotel services agreement:

Overbooking by Hotel.  If the Hotel over-books, then, within 14 calendar days of the occurrence of the over-booking, the Hotel shall pay to the Customer as liquidated damages, and not as a penalty, an amount equal to 30% of the average Room Rate for each Guestroom Reservation that the Hotel is unable to accept prior to the Reservation Cut-off Date.

For a discussion on whether it’s necessary — or advisable — to include “as liquidated damages, and not as a penalty,” as well as for an alternative approach, see Ken Adams’s piece “As Liquidated Damages and Not As a Penalty.”

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{ 2 comments… read them below or add one }

George Incampo April 3, 2013 at 12:20 pm

Can liquidated damages be in addition to other damages or must a party elect between the two types of damages?

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Jailani July 27, 2015 at 2:49 am

Can the client charge the Liquidated Damage for the period surpassed over the agreed completion date by the Contractor DESPITE THE CLIENT DOES NOT MEET ANY LOSS. But the Liquidated Damage amount is agreed by both the parties even during the agreement stage itself.

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