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Alfred State College *
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Course
1114
Subject
Law
Date
Nov 24, 2024
Type
docx
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3
Uploaded by PresidentMaskPuppy23
Discussion
How do liquidated damages differ from actual damages?
Liquidated damages can be considered as damages that are difficult to define in terms of
losses, and they remain as estimates of these intangible losses. They are often presented in
certain legal contracts between companies conducting business. In theory, these losses are
applied in situations where actual damages are difficult to establish, and the liquidated damages
serve as a fair representation of the losses incurred (Carney & Felsen, 2020). These damages are
also expected to be fair and not punitive to the party or parties suffering the losses. In the
business realm, a party that is expected to suffer a loss, especially from assets, is the one that
receives the clause with the circumstances that might lead to this party suffering the loss (Carney
& Felsen, 2020). For instance, Cem Uzan and Akhan Uzan suffer a loss of their 25 percent down
payment because they breached their contract with 845 UN. The contract stated that failure to
finish purchasing a condominium unit would lead to the loss of the 25 percent down payment as
liquidated damages. In this case, the 845 UN also suffered damages because of the bombing but
and the 25 percent down payment acted as liquidated damages on the side of Cem and Akhan
because both parties cannot recover this damage. Overall, the clause that was agreed upon by
both brothers and set in advance serves as the damages payable in the event of certain breaches.
The breach was from the side of the billionaire brothers. The actual damage suffered can be
considered as the damage caused in the event the brothers breached their obligation. Both are
unforeseen damages.
Do liquidated damages serve an important business purpose?
Liquidated damages serve as an important aspect within certain contracts depending on
the kind of business being conducted by the parties involved. For instance, this liquidated
damage is important to 845 UN because it allows them to continue with their plans despite Cem
and Akhan refusing to continue with the purchase of the condominiums. The importance of
liquidated damages arises from the fact that it holds parties to their agreements (Verma, 2017).
The party most likely to defer from a contract agrees to a clause, and in case this party breaches
the clause, it suffers the losses incurred. Even though Cem and Akhan suffer a noticeable loss in
their down payments, 845 UN also incurs losses because of the two brothers' withdrawal from
their initial agreement. Therefore, its importance is indicated by the loss that 845 UN expected to
suffer as the builder in the event that the Uzan brothers withdraw from the original agreement.
845 Un cannot prove that they suffer a loss; thus, they require such clauses when dealing with
clients to withstand such losses.
References
Carney, J., & Felsen, D. (2020). Understanding the Purpose, Limitations, and Benefits of a
Liquidated Damages Clause | Carlton Fields. Carlton Fields. Retrieved 30 March 2021,
from
https://www.carltonfields.com/insights/publications/2020/understanding-a-
liquidated-damages-clause
.
Verma, B. (2017). Importance Of Liquidated Damages Clause In A Contract -
Corporate/Commercial Law - India. Mondaq.com. Retrieved 30 March 2021, from
https://www.mondaq.com/india/contracts-and-commercial-law/615382/importance-of-
liquidated-damages-clause-in-a-contract
.
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