Liquidated Damages Clause in Commercial Contracts: A Pakistan’s Perspective

Authors

  • Kashif Imran Zadi University of Management and Technology Faculty Office, Library Building, Level-6, University of Management and Technology (UTM). C-II, Johar Town, Lahore, Pakistan. Author
  • Ahmad Abdul Rehman Khan University of Management and Technology Faculty Office, Library Building, Level-6, University of Management and Technology (UTM). C-II, Johar Town, Lahore, Pakistan. Author
  • Usman Hameed University of Management and Technology Faculty Office, Library Building, Level-6, University of Management and Technology (UTM). C-II, Johar Town, Lahore, Pakistan. Author
  • Khushbakht Qaiser University of Management and Technology Faculty Office, Library Building, Level-6, University of Management and Technology (UTM). C-II, Johar Town, Lahore, Pakistan. Author
  • Zarfishan Qaiser University of Management and Technology Faculty Office, Library Building, Level-6, University of Management and Technology (UTM). C-II, Johar Town, Lahore, Pakistan. Author

Keywords:

Liquidated Damage, Commerical Contract, Pakistan, Contract Act of 1872

Abstract

Economists believe that if the legal remedy for breach is expectation damages, the idea of efficient breach allows us to forecast when parties will choose to breach a contract. On the other hand, the economic premise of rational wealth-maximizing actors fails to reflect significant nonmonetary values and incentives that impact behavior in predictable ways. People act following shared community norms, such as the moral norm of honoring pledges, when interpersonal duties are informal or underspecified. However, when the parties specify or otherwise formalize punishments for uncooperative behavior, it becomes more strategic and self-interested. The remedy for breach is made apparent with a liquidated-damages clause. This article will highlight the issues about the cure for breach in cases where liquidate damages clause is exploited, focusing on the Common law and precedents by eminent judges, including Pakistan’s legislation.

Published

2024-02-21

Issue

Section

Articles

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