Answers to Questions About Liquidated Damages Clauses in Contracts
Call 800-929-1725 for an appointment at our offices in Wharton, Richmond or El Campo, Texas. Are you being asked to sign a contract with a liquidated damages clause? What are liquidated damages clauses anyway? In this video, experienced contracts attorney Ray Kerlick talks about liquidated damages clauses in contracts and their enforceability in Texas.
Here’s a summary of Attorney Ray Kerlick’s video discussion of liquidated damages clauses in contracts.
– Hi, my name is Ray Kerlick. I’m a partner with the law firm of Wadler, Perches, Hundl and Kerlick in Wharton, Texas. Today I want to talk to you a little bit about contracts and certain provisions that most of us have seen or heard of in contracts. Today I would like to talk a little bit about liquidated damages clauses.
Liquidated damage clauses typically are included in form contracts. What do I mean by form contracts? That means that it’s a contract that you had nothing to do with drafting and typically you’re going to be held to certain provisions within that contract even though you really had nothing to do with drafting them. Liquidated damages is often such a clause.
How Enforceable are Liquidated Damages Clauses?
Now, it’s important to know that in Texas, liquidated damages clauses are very weakly enforceable and what that means is they must have some relationship to the actual damage suffered, typically by delay or failure to perform. And so a liquidated damage clause says, if you’re a day late or for each day that you are late on a particular project, you owe $5,000, just to pick a number. Now if $5,000 is just literally that, a number picked out of the air, most courts will not enforce a provision like that. What they’re going to want to know is what is the actual cost of delay with regard to this particular project. If it’s simply the time value of money it may be just a percentage interest. It may be nothing at all depending on what the situation is. And so what we’ve seen is liquidated damages clause are almost always contested in a lawsuit.
So, I would suggest that anytime you’re signing off on a form contract of some sort, you should certainly strike a liquidated damages clause, if you are the contractor involved in that. And if they are unwilling to give then you should certainly contact an attorney to discuss what are my real liabilities here under this liquidated damage provision.
You Should Talk with an Experienced Contracts Attorney if You Have Concerns About a Form Contract
That’s typically true of almost any form contract or master service agreement as the case they be. You should always consult with an attorney to discuss what other types of provisions are in there but liquidated damage is one that strikes a lot of fear in people and probably shouldn’t. But, I’d be happy to discuss this with you at further length. Feel free to contact us to discuss it and we appreciate your time. Thanks.
If you have questions about a form contract or a liquidated damages clause, please call our office for an appointment at 800-929-1725 so one of our experienced contracts attorneys can review the document with you. Or if you’ve signed a contract with a liquidated damages clause and you’re concerned about the impact of the clause, please call our office for an appointment. We have offices in Richmond, El Campo, and Wharton, Texas.