Liquidated and Unliquidated Damages
Which act provides provisions for Liquidated and Unliquidated damages?
The Indian Contract Act 1872 provides provisions regarding liquidated and unliquidated damages. Sections 73 and 74 of the act provide guidelines regarding liquidated and unliquidated damages.
What are Unliquidated damages?
Liquidated and Unliquidated damages are comparable. Both aim to make up for a party’s losses caused by a contract violation. Unlike liquidated damages, however, the amount of unliquidated damages is not stated in the contract.
When are Liquidated Damages enforceable?
Liquidated damages are enforceable when they are considered reasonable and proportionate to the potential losses that could result from a breach of contract. Courts may invalidate liquidated damages clauses if they are deemed to be penalties rather than genuine estimates of damages.
What is the advantage of using Liquidated damages in a contract?
One advantage of using liquidated damages in a contract is that they provide certainty and predictability to both parties in the event of a breach. By agreeing on a specific amount upfront, parties can avoid lengthy and costly legal disputes over the calculation of damages.
When would Unliquidated damages be preferred over Liquidated damages?
Unliquidated damages may be preferred in contracts where the potential losses resulting from a breach are difficult to predict or quantify in advance. In such cases, it may be more appropriate to allow a court or arbitrator to assess the actual damages based on the circumstances of the breach.
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Difference between Liquidated and Unliquidated Damages
Liquidated damages and Unliquidated damages are the two kinds of damage. Liquidated damages are pre-agreed compensation for contract breaches, while Unliquidated damages are determined by courts after a breach. When a defendant breaches a contract, the damaged party is often awarded the amount necessary to put them back in the financial situation they were expecting. But the only thing that sets one type apart from the other is the method used to determine the amount payable.
Understanding the distinction between these two types of damages is crucial in contractual agreements and legal disputes.
Table of Content
- What are Liquidated Damages?
- What are Unliquidated Damages?
- Difference between Liquidated and Unliquidated Damages
- Conclusion
- Difference Between Liquidated and Unliquidated Damages- FAQs