Global Diversity in the Enforcement of Liquidated Damages

Originally published 14 September 2005

For centuries, business people have been pre-agreeing levels of compensation for breach of their contract. They do this because it helps them to assess the risks involved in the transaction and it simplifies and expedites the resolution of disputes that may arise from non-performance. To varying extents, the jurisprudence of many legal systems supports this behaviour by upholding the agreement of consenting adults.

The differences in approach across different major legal systems offers one very good reason why, where this is legally viable, a considered choice of law selection is important. In any event, the degree of robustness of the courts of any particular jurisdiction on the question of enforceability will go into the mix when assessing general project risk.