Liquidated Damages And Drafting Considerations For LD Clauses

Introduction

In our article on "Debt versus Damages- Why Bother?- Part I"¹, we have expressed our views that understanding whether the amount specified in the contract is a debt or damages (liquidated or unliquidated) will enable the contracting parties to avail appropriate remedies or to devise a suitable strategy to defend the demand made by the opposite party as the case may be.

While pointing out that if the amount specified in the contract qualifies as the amount of debt, the party claiming such amount does not have to prove breach of contract, any resultant loss and steps taken by it for reducing the amount, we have perfunctorily touched upon the subject of liquidated and unliquidated damages in said article.