Dictionary of Procurement Terms

Damages (usually in the form of money) to be paid by a party who breaches all or part of a contract with another party. The amount of damages is agreed upon by all parties to a contract. These damages may be applied on a daily basis for as long as the breach is in effect, but they may not be imposed as an arbitrary penalty. The key to establishing liquidated damages is reasonableness; it is incumbent upon the buyer to demonstrate, through quantifiable means, that damages did occur. See also: Penalty Charge, Damages.