This post was published to Online Education at 9:51:06 AM 12/23/2015

Liquidated damages versus limitation of liability

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A contractor might fail to complete the project as per the contractual date. The Owner may start
accumulating monetary losses or it could have an agreement with other companies. It is difficult to
quantity these losses. Hence the Owner and the contractor fix a definite amount as losses. These are
applied daily or weekly or monthly. These are known as liquidated damages. In this situation, the actual
losses are not measured but the losses per day or per week are negotiated and agreed upon.

In the case of Limitation of Liability, the actual losses are measured. If these losses are below the
contractual limit, the contractor pays the actual losses. IF these losses are beyond the contractual limit,
the contractor pays up to the contractual limit.