Liquidated Damages Clause Example

by Brian Rogers on December 22, 2012

in Sample Contract Language

People often come to the blog looking for a sample liquidated damages clause. Although I have a nice little piece explaining liquidated damages provisions and cautioning people to avoid including penalty provisions in their contracts, I haven’t provided sample language.

Liquidated damages clauses should be tailored to the specific situation — this is particularly important because courts won’t enforce penalty provisions. Thus, it’s important that (1) your clause not in fact be a penalty provision and (2) the liquidated damages clause clearly reflect an attempt to compensate the non-breaching party.

Here’s a sample provision modified from Stephen R. Guth’s sample hotel services agreement:

Overbooking by Hotel.  If the Hotel over-books, then, within 14 calendar days of the occurrence of the over-booking, the Hotel shall pay to the Customer as liquidated damages, and not as a penalty, an amount equal to 30% of the average Room Rate for each Guestroom Reservation that the Hotel is unable to accept prior to the Reservation Cut-off Date.

For a discussion on whether it’s necessary — or advisable — to include “as liquidated damages, and not as a penalty,” as well as for an alternative approach, see Ken Adams’s piece “As Liquidated Damages and Not As a Penalty.”

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