Liquidated Damages

In a contract, parties may agree to liquidated damages as indemnity or penalty for non-performance of any or all of the obligations in their agreement.[1]

Best Legal Practices:

Stipulate liquidated damages – The party who has interest to protect in a transaction should ask for liquidated damages to be stipulated in the contract. The amount for the penalty depends on the value of transaction involved to the said party.

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Obligations with a Penal Clause

If there is no stipulation to the contrary, the penalty in obligations that carry a penal clause substitutes the indemnity for damages, as well the payment of interests in case of non-compliance. This penalty is referred to as liquidated damages. To be entitled to the penalty, the creditor is not required to show proof of actual damages.

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