Nearly all public construction contracts contain liquidated damages clauses. These clauses are beneficial because they add certainty to the risk of late completion. Otherwise, the sky is the limit, and an owner could claim any damages the parties could have reasonably contemplated at time of contracting. Historically, liquidated damage clauses were held in disfavor and considered by courts as devices to extract penalties and forfeitures. They were, therefore, deemed against public policy. Over time, the rule evolved that such devices would be recognized as a useful commercial tool to avoid litigation when determining actual damages.
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