What does Liquidated Damages mean? Read on to discover the definition & meaning of the term Liquidated Damages - to help you better understand the language used in insurance policies.
Damages of a stipulated amount as agreed upon in a contract. Liquidated damages are often used in lieu of actual damages, especially in construction contracts. For example, a contractor may be liable for $10,000 per day for each day required to complete a project beyond the agreed-upon completion date. Liquidated damages are not intended to be punitive and must have a reasonable correlation to anticipated actual damages. Most contractors prefer liquidated damages provisions (as opposed to being liable for actual damages) because they offer greater ability to quantify the risk.
We hope the you have a better understanding of the meaning of Liquidated Damages.