Liquidated damages are a pre-agreed contractual sum payable by the breaching party upon a defined event such as late delivery, providing both parties with financial certainty without requiring the innocent party to prove the actual loss suffered.
In trade practice
In food and agri trade, liquidated damages clauses are most commonly applied to late delivery, particularly where missing a retail promotional window or a processing season has consequences that are real but difficult to quantify after the fact. The clause typically states a rate per day or per week of delay and a maximum cap, beyond which the buyer may treat the contract as repudiated. Courts in many jurisdictions will not enforce a liquidated damages clause if the sum is found to be a penalty rather than a genuine pre-estimate of loss, so the rate should be commercially justifiable. Suppliers should check whether force majeure events, port delays or documentary hold-ups at the EU border are carved out of the delay calculation.
In a specification
The contract clause should state the trigger event, the rate of damages, the maximum cap, and any events that suspend the running of the delay period, such as force majeure or buyer-caused delays.