DF11 - Liquidated Damages Liquidated damages clauses (LD or LDs) have been a source of controversy for lawyers over the years. On the one hand, the traditional view is that an LD is simply a penalty or punitive in nature. As part of our contract law, we want damages to be compensatory, not punitive. Therefore, LDs are not enforceable. Another school of thought suggests just the opposite. In cases where damages may be difficult to quantify and cause expensive litigation, LD serve to provide a formula for calculating damages that the parties have accepted in an arms length negotiation. For more information about LD provisions and drafting, please read this brief article published by Pillsbury Winthrop (a very prestigious law firm): LD Clauses (Links to an external site.)
The question for this DF is what do you think of these types of provisions? Do you think they are useful and should be utilized? What suggestions might you have when drafting these types of provisions.