How to Calculate Liquidated Damages

Written by morgan owens
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How to Calculate Liquidated Damages
Liquidated damages are stipulated in a contract. (signing a contract image by William Berry from

If you have suffered monetary damages as the result of another party's breach of contract, you may be entitled to liquidated damages if a clause providing for them was included in the contract. Liquidated damages are monetary compensation for a breach of contract. According to Melone and Karnes, "these damages are only appropriate when the actual damages resulting from the breach of contract are difficult to ascertain or uncertain." The amount of these damages must be "reasonably proportionate" to the actual amount of the loss for them to be enforceable in court.

Skill level:
Moderately Easy

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  1. 1

    Determine any known amounts of money that have clearly been lost by the breach of contract (for example, loss of rent during the time after the apartment's occupant stopped paying rent prior to its being rented by a new occupant). Add these values together.

  2. 2

    List all unknown damages incurred (i.e. profits lost from the failure of a contracted answering service to answer calls). Assign monetary values to each of these damages. These amounts must be reasonable and reflect the realistic monetary value of the losses incurred. Add these values together.

  3. 3

    Add the value you obtained from Step 1 to the value obtained from Step 2. The sum of these values is the total of the liquidated damages.

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