Jensen, D A and Patterson, J E (2011) Janus head of liquidated damages: Does public policy influence United States courts regarding enforceability of a liquidating damages clause? International Journal of Construction Education and Research, 7(2), pp. 143-156. ISSN 1557-8771
Abstract
For a liquidated damages clause to be legally enforceable, it must not be economically punitive. The scholarly literature maintains there exist four legal test to validate a liquidated damages clause. These test are: a) intent, b) difficulty, c) reasonableness, and d) public policy. It is the application of the public policy test that creates scholastic controversy. Therefore, the purpose of this research is to statistically ascertain whether the United States court system employs a public policy legal test to determine the enforceability of a liquidated damages clause. The sample set is composed of 43 United States Federal appellate court cases. Chi-square and Cramer V coefficient, measuring judicature application preference, resoundingly rejected the null hypothesis: the United States Federal Court system maintains a patterned application preference to test the validity of a liquidated damages clause using a public policy test. This outcome is represented by a percent case split equaling a 3 to 40 metric. This metric translates into 7% of the cases applied a public policy measure, while 93% of the cases made no application, nor crafted a discussion regarding public policy. Therefore, providing the empirical conclusion that the public policy test possess inconsequential effect regarding validating a liquidated provision.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | liquidated damages; penalty provision; prime contractor's default |
| Index terms: | validity, liquidated damages, damages, penalty, default, United States, preference, public policy |
| Subjects: | dispute resolution, regulatory law, public policy, evaluation and assessment methods, decision-making and reasoning, contractual remedy, Geography |
| Topics: | Legal Issues, Geographical Context, Contract Administration, Governance, Research Practice |
| Descriptive scope: | 3 PCA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here