In the event of a contract violation, the defaulting party is obligated to pay liquidated damages and a penalty to the aggrieved party. The terms liquidated damages and penalty clauses are not interchangeable, and there is a distinction to be made. Even in a court of law, these terms are frequently used interchangeably, causing confusion. Let's take a closer look at the laws that govern them, as well as the difference between liquidated damages and penalty.
Liquidated damages and penalty: what's the difference?When two or more parties agree into a contract, the amount of compensation to be paid by the defaulting party may be included in the contract. The enforceability of the compensation and the acceptance of that amount as damages differ according to English Law and the Indian Contract Act in the case of non-performance of the contract.
In situations when genuine damages are difficult to determine, liquidated damages are implied as a reasonable depiction of calamities. Liquidated damages are often designed to be reasonable rather than remedial.
Liquidated damages may be mentioned in a specific agreement provision to cover situations where a party suffers a loss due to resources with no direct financial link. For example, if a party to an agreement spills production network valuing data that is critical to a firm, liquidated damages may apply.
A typical model is a step in the development of a new product that may include meetings with outside providers and experts in addition to company personnel. The market value of secret plans or plans for an item is unlikely to be fixed. This may be true regardless of whether the resulting item is critical to an organisation's growth and development.
I conclude my answer regarding the difference between liquidated damages and penalty.
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Difference Between Liquidated Damages And Penalty?
Pranav
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2022-03-04T19:18:57+00:00 2022-03-04T19:32:43+00:00Comment
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