Are liquidated damages clauses in construction contracts enforceable? That’s a question that is often litigated in construction disputes.
It’s not surprising that some of the most popular articles on this blog address examples of courts refusing to enforce liquidated damages clauses in a construction contracts. For two examples of Florida courts finding liquidated damages clauses unenforceable, click here and click here.
Generally, liquidated damages provisions are enforceable. But there are circumstances where courts will refuse to enforce such a provision. Under Florida law, a liquidated damages clause will not be enforced if a court concludes it is a penalty clause. There is a two-part test for determining whether a liquidated damages clause will be stricken:
(1) the damages flowing from a breach of contract are not readily ascertainable; and
(2) the daily rate of liquidated damages is not grossly disproportionate to the damages that might be expected to flow from a breach.
While not a Florida case, a Georgia court recently considered whether a liquidated damages clause in a construction contract was enforceable.Continue Reading Georgia Court Refuses to Enforce Liquidated Damages Clause