Considerations For Avoiding Waiving Contractual Rights To Collect Liquidated Damages

Liquidated damages clauses are inserted into contracts to establish a pre-determined amount of compensation to the non-breaching party where the damages may be difficult to calculate. A variety of circumstances may trigger liquidated damages, including when (1) a party fails to deliver goods on time (thereby causing a delay in production and/or lost sales); (2) a party abandons a lease before its expiration (thereby causing the owner to suffer lost rents and other costs until it obtains a replacement tenant); and (3) a contractor fails to complete a project on time (thereby delaying a new business location's opening and causing the owner to incur lost profits).

Like all contract provisions, the non-breaching party's words and/or conduct can waive liquidated damages provisions. To determine if a party has waived their ability to seek liquidated damages, courts consider (1) the contract's terms and whether the moving party provided notice of the event that triggered