Contracts & ExecutionQuestion 827 of 1605
A contract states, 'Liquidated damages of $500 per day shall apply for each day completion is late beyond the substantial completion date.' If the contractor finishes 10 days late, the owner's presumptive recovery under a valid clause is:
a.Only $500 total regardless of days
b.$5,000 (10 days times $500), without separately proving actual daily losses
c.Triple damages of $15,000
d.The owner must prove actual daily losses instead
Explanation
The point of an enforceable liquidated damages clause is that the parties agreed in advance on the daily amount, so the owner recovers the stipulated sum, here 10 days times $500, or $5,000, without having to prove exact actual losses. That certainty is the benefit of the clause. The owner is not limited to a single day's amount, and liquidated damages are not multiplied into treble damages.
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