Liquidated Ascertained Damages

The Existence

 It’s existence in PAM Form & PWD Form

·        cl. 40 & Appendix To The Conditions -- for PWD Form 203

·        cl. 22.0 & Appendix – for PAM Form

It also exist by virtue of section 75, Contract Act, 1950.

 What Is LAD?

 -   The ascertained amount, expressed in Ringgits and Sens, which an injured party has sustained, or is taken to have sustained.

-   It is an ascertained or calculated monetary loss claimed in an action.  It is also a sum provided by a contract (written agreement) as payable in the event of breach.

-     Where contracting parties make a genuine pre-assessment of the loss that would flow from any particular breach, and stipulate accordingly in their contract that this sum shall be payable in the event of a breach.      

Is It Binding?

Yes, according to Dunlop Pneumatic Tyre Co. Ltd. V. New Garage and Motor Co. Ltd. (1915) A.C. 79; (1914-15) All E.R.Rep. 739, the terms in the contract (consisting this clause) (L.A.D. Clause) is binding on the parties.

In the event of a breach, the sum fixed and no more and no less can be claimed.

 Why LAD Clause?

 The amount are ascertained and agreed beforehand by the parties, and therefore it follows that the only dispute will be as to the breach it self, not the damages.

 How It Operates?

  

Firstly, the parties agreed  to include in the terms of the contract, the term consisting a clause for damages.

Secondly, in the said clause, the parties have already ascertained the amount payable to the injured party (the party affected by the breach, usually the client in construction contract).

Thirdly, if there is any breach then the party will enforce the said clause as to the damages (the sum that has already ascertained/mentioned).