Contract - remedies - liquidated

Question 1

What is a liquidated damages clause?

Answer 1

Stipulates a certain sum payable on particular breach
💥💵

Question 2

How are liquidated damages clauses interpreted?

Answer 2

Starting point = upheld

Courts intervene will strike it out where it’s a
- penalty clause ⚽️,
AND
- C will be entitled to unliquidated damages 💵

Question 3

What is the test for determining whether a liquidated damages clause is a penalty clause?

Answer 3

1. Primary🥇 or Secondary 🥈Obligation?

• Primary 🥇= part of primary obligations of contract;
• Secondary 🥈= obligation triggered by breach to compensate

2. If secondary 🥈, clause is a penalty ⚽️ if it imposes a detriment out of all proportion to any legitimate interest ⚖️