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You will often find a provision in a contract that sets a pre-determined dollar amount one party will pay the other if there is a breach of contract. These are called liquidated damages provisions. You will find them in construction contracts, leases, any many other types of contracts.
Under Washington State law, true liquidated damages clauses, those that are not penalties, are favored and will be upheld. Washington court have held that liquidated damages agreements that are fairly and understandingly entered into by experienced, equal parties with a view to fair compensation for the anticipated loss should be enforced. However, if the parties to the contract are not on equal footing, or if the amount stated is a penalty with no reasonable relation to actual damages will be construed as a penalty, and the liquidated damages provision might not be enforced. As you can see, there is room for legal positioning and several defensive arguments that might apply in a breach of contract case concerning a liquidated damages provision, so it's best to understand the law before inserting one in your contracts. Contact Mark D. Walters Comments are closed.
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