Unliquidated damages refer to damages that cannot be accurately or easily quantified or assessed at the time of contract formation. The damages are not yet determined and are uncertain until the occurrence of a breach of contract.
In a contract, damages are typically categorized as either liquidated damages or unliquidated damages. Liquidated damages are damages that have been predetermined and agreed upon by both parties in the contract, should a breach occur. On the other hand, unliquidated damages are damages that are not predetermined and require an assessment to be made.
For example, if a construction company agrees to complete a project by a certain date, and fails to meet the deadline, the contract may include a clause stating that the company will be required to pay a certain amount of money for each day that the project is delayed. This is an example of liquidated damages.
Unliquidated damages, however, are damages that are uncertain at the time the contract is signed. They may result from a breach of contract, but the exact amount of damages cannot be accurately determined. For example, if a tenant breaches their lease agreement by vacating the property early, the landlord may be entitled to unliquidated damages for loss of rent and other associated costs.
When a contract includes a clause for unliquidated damages, the court will typically evaluate the damages on a case-by-case basis and determine the amount that is reasonable and fair. The court may consider various factors, such as the nature of the breach, the scope of the contract, and any other damages that may have resulted.
It is important to note that unliquidated damages should not be used as a penalty or as a way to deter a party from breaching the contract. In fact, if the amount of unliquidated damages is deemed unreasonable, it may be considered unenforceable.
In conclusion, unliquidated damages refer to damages that cannot be accurately determined at the time of contract formation. They are typically evaluated on a case-by-case basis by a court and should not be used as a penalty. It is important to understand the distinction between liquidated and unliquidated damages when drafting or reviewing contracts to ensure that the terms are fair and reasonable.