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Liquidated damages clauses are a risk allocation tool used across business, commercial, real estate and sometimes employment agreements.
On the occurrence of certain carefully defined triggering events, the breaching party is liable for the liquidated damages amount. Triggering events run the gamut from failure to deliver marketable products on a timely basis to early termination of an employment contract.
Though these clauses are intended reduce the risk of post-closing litigation over damages, the scope of damages is not always knowable at closing and poorly drafted clauses may cause more litigation.
This program provides a real world guide to the essential elements of enforceable liquidated damages clauses.
- Law governing liquidated damages clauses
- Elements of clauses – damages difficult to quantify and liquidated amount reasonably related to actual damages
- Guidance on optionality, specificity, self-justification, and triggers
- Circumstances in which clauses are most effectively used – and those where they are ineffective
- Practical tips of enhancing enforceability and collecting damages