Florida Liquidated Damages Clauses: What Courts Look For
What Are Liquidated Damages?
Liquidated damages clauses fix the amount of compensation owed for a specific breach, saving both parties the cost and uncertainty of proving actual damages. In Florida, they are prevalent in construction contracts, real estate purchases, and commercial agreements.
Florida's Enforceability Standard
Florida courts apply a reasonableness standard to liquidated damages clauses. The Florida Supreme Court in Lefemine v. Baron (1978) held that a liquidated damages provision is enforceable when:
- The damages resulting from breach are not readily ascertainable at the time of contracting
- The stipulated amount is a reasonable pre-estimate of the probable loss
Florida law does not require a rigid proportionality test but does distinguish between legitimate liquidated damages and penalties intended to punish breach.
Important Florida-Specific Rules
- Construction contracts — Liquidated damages for delay are standard in Florida construction agreements, including both public and private projects. Florida courts generally uphold per-diem rates for construction delays when they reflect reasonable estimates
- Real estate deposits — Florida follows the general rule that forfeiture of earnest money deposits as liquidated damages is enforceable if the amount is reasonable (typically 5-10% of the purchase price)
- Exclusive remedy — When a contract designates liquidated damages as the exclusive remedy, the non-breaching party generally cannot also pursue actual damages for the same breach
- Burden of proof — The party challenging the liquidated damages clause bears the burden of showing it is a penalty
Red Flags
- The liquidated amount is clearly disproportionate to any conceivable loss from the breach
- The contract allows the non-breaching party to pursue both liquidated damages and actual damages
- The same amount applies to trivial and material breaches alike
- No evidence that the parties considered actual damages at the time of contracting
When to Consult a Lawyer
Consider consulting a Florida attorney if you are facing a liquidated damages clause in a construction or real estate context, or if the clause amount appears punitive rather than compensatory. A lawyer can evaluate whether the clause satisfies Florida's reasonableness standard.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.