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CaseLaw
CaseLaw, Attorney
Category: South Africa Law
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Experience:  BCom; LLB; Masters in Law
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What is the difference between liquidated damages and a pe

Resolved Question:

What is the difference between liquidated damages and a penalty
Submitted: 5 years ago.
Category: South Africa Law
Expert:  CaseLaw replied 5 years ago.
Hi there,

Liquidated damages (also referred to as liquidated and ascertained damages) are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g., late performance).

e.g. If you breach the contract then you will pay me R10,000.00. The amount has already been ascertained, and does not need to be proven.

A Penalty however is usually something that is forfeited, as a sum of money, especially upon a nonperformance, breach of contract etc.

e.g. If you breach the contract then you will lose your deposit.

Damages that are sufficiently uncertain may be referred to as unliquidated damages, and may be so categorized because they are not mathematically calculable or are subject to a contingency which makes the amount of damages uncertain.

For example, suppose John agrees to lease a store-front to Mary, from which Mary intends to sell jewellery. If John breaches the contract by refusing to lease the store-front at the appointed time, it will be difficult to determine what profits Mary will have lost because the success of newly created small businesses is highly uncertain. This, therefore, would be an appropriate circumstance for Mary to insist upon a liquidated damages clause in case John fails to perform.

If there is something more specific that you need clarity on, please continue in this same thread.

Good luck and best regards,


CaseLaw


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Customer: replied 5 years ago.

Thank you for your answer it is definitely helping but could you spread more light on

What is meant by "time at large"? How does it effect the employer's entitlement to levy liquitated damages/ penalties for late completion.

 

Also to let you know I've already paid the amount of R247 yesterday, thought I need to pay before getting an answer

 

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Expert:  CaseLaw replied 5 years ago.
Hi again,

What is meant by "time at large"? How does it effect the employer's entitlement to levy liquitated damages/ penalties for late completion.

Perhaps you could be more specific... what's actually going on? I don't have any context to this question...

CaseLaw
Customer: replied 5 years ago.
Its a building contractor that is running 10 days late on practical completion, a JBCC contract was signed but there was variation orders also included and no extension of time was asked for during the contract duration for variation orders and assumed that the contractual agreed time will be reached on time. I've also surf the web for case studies and found the

Group Five Building Ltd ("the Plaintiffor") v Minister of Community Development on the web.

I think I've found my answer that the contractor should provide a reasonable time to complete all outstanding work as time is of essence.

 

Expert:  CaseLaw replied 5 years ago.
Hi again,

If there were variation orders then surely you can assume that there is an extension of time? I think that you are however correct.

Good luck and best regards,


CaseLaw


I hope you found my answer helpful, please click on the GREEN ACCEPT button above for my answer (EVEN IF YOU ARE A SUBSCRIPTION MEMBER). This is necessary for me to be paid for my work and so that I can get credit for assisting you. Your question will not close, and you will still have the opportunity to follow-up if needed. Leaving a bonus and positive feedback is not required, but doing so is certainly appreciated!

Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If you have additional questions, please keep in mind that I do not know what you already know or don't know, or with what you need help, unless you tell me. Please consider that I am answering the question or question that is posed in your posting based upon my reading of your post and sometimes misunderstandings can occur. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered.

Also remember, sometimes the law does not support what we want it to support, but that is not the fault of the person answering the question, so please be courteous.


Please note: This answer does not create an attorney-client relationship. Please consult a local attorney in person for legal advice. This information is being provided so you can better discuss legal matters with your attorney.
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