The employer was therefore entitled to claim liquidated damages for the entire period of delay, including delays which extended beyond the date of termination. This figure was the same for each of the five contracts even though the arrays being constructed under each of those contracts had a different output and were constructed at different times of the year, output obviously being affected by the weather. Liquidated damages are a genuine pre-estimate of the loss and damage caused by a breach. They are attractive as they avoid need for the injured party to prove actual loss resulting from breach. The court held that the liquidated damages were not a genuine pre-estimate of the loss flowing from Speirs. Become your target audience’s go-to resource for today’s hottest topics. In the recent case of GPP Big Field, the liquidated damages were actually described in the contract as a penalty. The OFT expressed the view to the BPA that when claiming liquidated damages, they must meet the requirement of being a genuine pre estimate of loss. Today we are one of the UK’s top 100 law firms, with over 80 partners and a reputation for providing solutions that work. The liquidated damages figure should therefore reflect the loss that the employer would suffer in the event of a specified breach occurring. The case itself concerned an IT contract which provided for completion and handover of the work in stages. For instance, in the JCT 2016 Design and Build contract, the consequences of termination for contractor’s default include the extra over cost incurred by the employer in completing the works and also “any direct loss and/or damage caused to the Employer and for which the Contractor is liable, whether arising as a result of the termination or otherwise”. This is not the same as having to prove, in every case, the actual loss caused by the actual breach. For example, a clause says that B must do X, Y and Z; if B does not do X, Y and Z, B must pay liquidated damages of A$10,000 a day to A. We draw together the multiple strands of a business or personal challenge into a coherent, integrated legal response that combines the knowledge and experience of experts in all the relevant fields. The Court of Appeal has now considered “penalty clauses”. In Makdessi, Mr Makdessi sold his business and then breached his restrictive covenant. For further information on this topic please contact Emily Eliades at Piper Alderman by telephone (+61 2 9253 9999), fax (+61 2 9253 9900) or email (eeliades@piperalderman.com.au). History From the early 14th century to the late 16th century, the law governing agreed damages clauses was harsh, with remedies going way beyond adequate compensation. In a landmark decision in 1915, Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd declared that an agreed damages clause would be considered a penalty and unenforceable if the sum stipulated was extravagant and unconscionable in comparison to the greatest loss that might conceivably be proved to have followed from the breach. Formulating or reviewing liquidated damages clause Courts do not like to interfere with the contractual freedom of parties and will be reluctant to step in and intervene in business dealings between large organisations. However, if A can calculate the individual loss for each of X, Y and Z (ie, if X is not done, but Y and Z are, the damages would be A$5,000; if X and Y are done, but not Z, the damages would be A$7,500), then A will be unable to rebut the presumption because the clause will not represent a genuine pre-estimate of the loss. 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