Liquidated damages post Andrews - a double-edged sword

The Andrews and Paciocco cases have generated a lot of publicity around the law of penalties. Many articles have been written urging suppliers and customers to reconsider key provisions in contracts to ensure they are not penalties.

But a recent case in Queensland (IPN Medical¹) has provided clear guidance when it comes to liquidated damages clauses.

The outcome in IPN Medical confirms that suppliers will have a hard task trying to prove that any pre-agreed amount should be struck out as a penalty.

On the flipside, the sting for customers is that valid liquidated damages clauses act as a limitation of liability. The trick is to make sure the liquidated damages clause protects all benefits of the bargain.