Liquidated Damages in a San Diego Contract Lawsuit
The default rule for contract damages is that the plaintiff is entitled to the harm foreseeably caused by the defendant’s breach.
To avoid uncertainty, however, if litigation occurs, the parties to a contract may use a “liquidated damages” clause to determine damages in advance. There are some limitations, however.
A liquidated damages clause is generally valid, unless the defendant proves it was unreasonable under the circumstances when the parties entered into the agreement. In the absence of a reasonable relationship between the liquidated and actual damages the parties contemplated for breach, the clause is not enforceable.
Liquidated Damages in Consumer Contracts
Unless it would be impracticable or extremely difficult to fix the actual damage, a liquidated damages clause is void in a consumer contract, which is defined as a rental/sales contract for property or services, primarily for personal, family, or household purposes), or in a real property lease agreement for a house/condo/apartment.