Clause Guide
Liquidated Damages Clause clause: meaning, risks, and what to negotiate
Sets a predetermined amount payable if certain obligations are breached.
What it means
Liquidated damages clauses provide certainty by defining compensation in advance.
Common risks
3 risks identifiedThe damages amount may be excessive.
The clause may act as a penalty.
You may face automatic financial liability.
What to check before signing
ChecklistHow damages are calculated.
Whether the amount reflects genuine loss.
Whether it applies symmetrically.
Negotiation ideas
ActionableEnsure the amount reflects realistic losses.
Cap the total liability.
Limit the clause to specific breaches.
Example clause
If delivery is delayed beyond the agreed deadline, Supplier shall pay liquidated damages equal to 1% of contract value per week of delay.
Frequently asked questions
1 questionsWhat are liquidated damages?
They are pre-agreed compensation amounts for specific contract breaches.
Want help reviewing the full contract?
A single clause rarely tells the whole story. Scan the full agreement to spot risks, missing protections, and negotiation points across the whole document.