Liquidated Damages: The Perception of The Construction Industry

Abstract

There are several misconceptions about the term “liquidated damages” (LD) as many believe it is a penalty levied for delay or breach of contract. However, in a key judgement in a court it was presumed that LD is a sum payable upon breach and must be a genuine pre-estimate of the loss the innocent party would suffer in respect of the breach. If the intention of the LD is to threaten the guilty party into performance (rather than to compensate the innocent party), it is likely to be seen as a penalty. However, the perception of the Indian construction industry to the inclusion of the clause in the contracts was necessary to be studied. This paper tries to understand the perception of the Indian construction industry to the term LD.
Keywords: Construction Industry, liquidated damages, contract