Liquidated Damages: A Comparative Study of the Law in England, Australia, New Zealand, and Singapore

Abstract

The paper traces the development of the law relating to liquidated damages in Australia, New Zealand, England, and Singapore. The examination reveals that there is little difference because the courts in each jurisdiction have drawn on common precedents. The paper canvasses the distinction between a genuine pre-estimate of the likely damage and a penalty. Where a party has sought to guarantee compliance with a contract by use of a liquidated damages provision that coerces his or her contractual partner, there is a potential for the clause to be held to be void as a penalty. However, there is a developing reluctance on the part of the courts to interfere with the bargain made by the parties. The use of liquidated damages clauses adds to the predictability of the outcomes of construction contracts. The consequences of a liquidated damages provision being held to be void are discussed. The work concludes with an examination of situations where a party can elect to claim the damages assessed by common law principles in lieu of liquidated damages.