What is liquidated damage in procurement contract? When the liquidated damage can be imposed on supplier?

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Posted by:
jen belly
29-November-2015

Purchasing Procurement Supply Chain Facility Operations Project Management

Question ajoutée par Md Fazlur Rahman , Procurement Specialist , Engineering and Planning Consultants Ltd
Date de publication: 2016/03/18

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par Nadeem Asghar , Supply Chain Consultant/Trainer , Independent Practitioner

LD is defined as Monetary compensation for a loss, detriment, to a person or a person's rights or property,under terms of a contract.

Generally, contracts that involve the exchange of money or the promise of performance have a liquidated damages stipulation. The purpose of this stipulation is to establish a predetermined sum that must be paid if a party fails to perform as promised.

Damages can be liquidated in a contract only if (1) the injury is either "uncertain" or "difficult to quantify"; (2) the amount is reasonable and considers the actual or anticipated harm caused by the contract breach, the difficulty of proving the loss, and the difficulty of finding another, adequate remedy; and (3) the damages are structured to function as damages, not as a penalty. If these criteria are not met, a liquidated damages clause will be void.