Real Estate Law
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Liquidated damages are intended to fix contract damages where it would be unreasonably difficult to estimate contract damages in advance. The contractor knows how much his/her time is worth, so you ought to be able to determine those costs based upon an hourly fee, in the event that the insurance claim is not approved.
Fixing the cancellation fee based upon the ultimate size of the claim provides an incentive for the contractor to increase the price, because that increases the damages if the claim isn't approved. There's no way I would agree to that provision. I'd either offer a fixed amount for his time, or offer to pay an hourly fee.
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