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ARTICLE · 27 JANUARY 2026

Avoiding Unenforceable Penalties: Georgia's Take On Liquidated Damages

Nelson Mullins Riley & Scarborough LLP
Nelson Mullins Riley & Scarborough LLP
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Liquidated damages clauses are a common feature in contracts across industries, including construction, where they serve as a mechanism to predefine compensation...

United StatesReal Estate and Construction
Jake Carroll
Jake Carroll
Carroll Hart
Carroll Hart

Liquidated damages clauses are a common feature in contracts across industries, including construction, where they serve as a mechanism to predefine compensation for contractual breaches, including delayed completion. However, under Georgia law, a poorly drafted liquidated damages clause may be invalidated as an unenforceable penalty, leaving parties without the intended protection.

Understanding Georgia's framework for enforceability is essential to drafting liquidated damages provisions that will withstand judicial scrutiny.

The Legal Standard for Enforceability in Georgia

Under Georgia law, liquidated damages clauses are enforceable if they satisfy three key criteria:

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