Liquidated Damages

Liquidated Damages

Parties may agree to a “liquidated damages” clause because it generally promotes efficiency (e.g., obviates the cost and time required to litigate in court) and introduces certainty when a breach is committed by a party by pre-estimating the loss to the aggrieved party. However, to avoid problems with enforcement of such a clause and to ensure that a breaching party does not pay more than what is fair to remedy a breach, the parties may agree to language stipulating that the clause does not impose a penalty but rather constitutes compensation:

Exemplar C48-1

The Parties agree and acknowledge that the liquidated damages specified in this Agreement represent a genuine pre-estimate of the loss to Customer and are not intended to operate as a penalty.

Exemplar C48-2

Licensee agrees to pay to Owner an amount equal to the fee set out below, or $100,000 USD, whichever amount is the highest, for each copy or installation of the SDK that is distributed unauthorized. The foregoing payment shall constitute and serve as liquidated damages (and not a penalty) and shall be deemed to fully compensate Owner for any costs and damages arising from any unauthorized distribution of the SDK.

Exemplar C48-3

For purposes of clarity, any payment of a performance-correction payment (PCP) by Seller for a breach of a performance requirement as specified in Appendix I shall constitute and represent liquidated damages (and not a penalty) for such breach, and such payment shall be deemed to fully compensate Customer for any costs and damages arising from such breach, but not for performance failure beyond a PCP’s scope.

Exemplar C48-4

SUPPLIER is committed to one hundred percent (100%) fulfillment of its obligations as described in the Agreement and any Orders. Any consideration paid by SUPPLIER for its failure to fulfill its obligations shall be considered a liquidated damage and not a penalty. Both Parties agree that any consideration represents a reasonable pre-estimate of Customer’s probable loss.