To avoid lengthy disputes over damages, many construction contracts include a liquidated damages clause—a provision that sets a fixed amount to be paid if the contractor breaches certain terms of the agreement. But are these clauses always enforceable under Oklahoma law? This article explains what liquidated damages are, when such clauses are enforceable, and how Oklahoma courts treat them in construction contract disputes.
What Are Liquidated Damages?
Liquidated damages are pre-determined sums agreed upon by the parties at the time the contract is signed. These amounts represent a reasonable estimate of the actual harm that could result from a breach, such as delayed project completion or missed deadlines.
In construction contracts, liquidated damages are often calculated on a per-day basis, such as $500 for each day the project runs past the agreed completion date. The goal is to provide predictability and avoid costly litigation over calculating actual losses.
Are These Enforceable in Oklahoma?
Oklahoma courts generally enforce liquidated damages clauses if they meet certain legal standards. Under Oklahoma law, a liquidated damages provision is enforceable if:
- Actual damages are difficult to measure when making the contract.
- The amount stated is a reasonable estimate of the anticipated loss.
- The clause is not a penalty to punish the breaching party.
If the court determines that the amount of damages is excessive or punitive, the clause may be unenforceable.
How to Draft an Enforceable Liquidated Damages Clause
To improve enforceability under Oklahoma law, a liquidated damages clause should:
- State clearly that actual damages are difficult to calculate
- Include a daily or total amount based on reasonable projections
- Avoid any language suggesting the purpose is to penalize or punish
- Both parties agree
Both contractors and property owners should consult legal counsel to ensure the clause is fair, reasonable, and consistent with industry standards.
Conclusion
Liquidated damages clauses can provide clarity and certainty in Oklahoma construction contracts, but they must be carefully drafted and based on fair, reasonable estimates. When properly structured, these clauses are enforceable and can serve as a powerful tool for managing risk and setting expectations. If you need help, our contract team at Kania Law – OKC Attorneys can help. Call us today at 405-367-8710 or ask a question online.
