clause against the legitimate interest of the party seeking to enforce it. This approach marked a broader examination of the party’s interest in receiving performance, rather than a mechanical and narrow focus on possible loss. This approach is of significant use in the construction industry, given the nature of construction contracts often involves interests broader than money alone (such as community expectations, reputation and goodwill).
However, while UK Courts are able to uphold liquidated damages clauses, the Courts have no jurisdiction to adjust the amount of liquidated damages agreed on to make the sum more commercially sensible in cases where the sum is penal.
Comparatively, the Court’s approach to liquidated damages, and the penalties doctrine have developed along considerably different lines in other jurisdictions such as India and Malaysia. In these countries there is no hard and fast distinction between a penalty and liquidated damages clause, or a general entitlement to receive an amount in the event of a breach. Closer to home, recent Australian authorities such as the High Court decision in Andrews4 widened the scope of the penalties doctrine to potentially any contractual stipulation, rather than just breach of contract. However, Professor Jones notes that this approach has received considerable criticism for its implications on the drafting of contracts, especially performance-based contracts and contacts including contingent obligations.
Author - Professor Doug Jones, AO
Doug is a leading international arbitration specialist. He has acted as Arbitrator and appeared as Counsel in numerous international arbitrations. Doug is also regularly involved in ADR including mediation in project disputes.
Doug is personally recognised as one of the world's leading construction and infrastructure lawyers and has received many endorsements and accolades internationally.
His experience includes acting as Counsel and Arbitrator in major international Arbitrations, and advising on project issues worldwide.
He is also a panellist with the Building Disputes Tribunal. For more infomation on Prof. Doug Jones, click here.