Liquidating damages calculation for hud construction
The developer was to subdivide the land and had authority to do so from the Council on certain conditions.One condition required improvements to a road before any subdivision and sale occurring.It wasn’t until after that time that the developer engaged Spiers to do the road works.The initial contract contained a liquidated damages clause.The developer initially contracted with Spiers to do construction work, but not to complete the road improvements.Practical completion was subsequently delayed by two months.
Spiers argued this was a penalty and therefore unenforceable.
For the clause to be enforceable, the damages specified must represent a genuine pre-estimate of loss that the aggrieved party is likely to suffer as a result of the other party’s breach.
This amount is calculated at the time of entering into the contract.
So, a court will enforce the provision, as each party is expected to hold up their end of the bargain.
However, there are limits on the enforceability of liquidated damages clauses.