TO: Myron Gibbons
FROM: Rob Williams
RE: SWFWMD liquidated damages clause
DATE: March 8, 1974
Is the liquidated damages clause presently used in
the Districts' engineering contracts, providing for damages of
$100.00 per day, binding and enforceable even though no actual
damages can be proven?
DISCUSSION; GENERAL LAW:
As a general rule, the amount stipulated in a contract
as liquidated damages may be recovered on the breach of the con-
tract without proof of actual damage if said amount is construed by
the court as liquidated damages and not as a penalty. Williams
v. Crouch, 186 So. 2d. 491 (Fla. 1966). Thus, the determinative
issue in any liquidated damages dispute is whether the provision
is construed as actual liquidated damages or as a penalty.
The character of the liquidated damages clause is
determined by various factors, but there is no fixed or general
rule; each case must be governed by its own facts or circumstances.
Smith v. Newell, 37 Fla. 147, 20 So. 249 (Fla 1896); Pembroke v.
Caudill, 160 Fla. 948, 37 So. 2d 538 (Fla. 1948). The question
is always one of law for the court and is to be determined from the
nature or character of the contract, the terms and purpose sur-
rounding its execution, the natural and ordinary consequences of
its breach, the intention of the parties, and the relationship
between the stipulated sum and the actual damages, among others.
The prime factor is whether the stipulated sum
is just compensation for damages resulting from the breach.
Stenor, Inc. v. Lester, 58 So. 2d 673 (Fla 1951). If the actual
damages are readily ascertainable and the stipulated damages are
disproportionate to the actual damages then it seems likely that
( the stipulated sum will be deemed a penalty and thus be unenforce-
able. e.g., Poinsettia Dairy Products, Inc. v. Wessel Co. 123
Fla. 120, 166 So. 306 (Fla. 1936). On the other hand, where the
actual and stipulated damages are not disproportionate, the stipu-
lated sum will probably be held to be liquidated damages, unless
the real intention of the parties show otherwise. Southern Men-
haden Co. v. How 63 So. 2d 1000 (Fla 1916).
In addition, to the proportion rule, the courts must
also implement the rule of certainty. Simply stated, this rule
provides that the certainty or uncertainty of damages are important
matters in determining the character of the stipulate sum. 9A Fla.
Jur Damages 110. If the actual damages are difficult to prove by
some know rule or pecuniary standard, the stipulated amount will
regarded as liquidated damages, North Beach Invest. Inc. v. Sheiker-
vitz, 63 So. 2d 498 (Fla 1953), at least if the sum is not grossly
unreasonable. If, however, the actual damages are readily as-
certainable, and the stipulated sum is disproportionate thereto, it
will be regarded as a penalty. North Beach Invest. Inc. supra.
Finally, it should be noted that the fact that the parties designated
the stipulated sum as "liquidated damages" is not conclusive as to
the character of the sum. Hyman v. Cohen, 73 So. 2d 393 (Fla
As the above general principles indicate, it seems
clear that if the District suffered no actual damages from a
delay and that this fact can be readily shown, then the stipu-
lated sum of $100.00 per day will probably be deemed a penalty
and the District cannot recover beyond the extent to which it
alleges and proves actual damages. It is equally clear, however,
that if acutal damages are not ascertainable by some objective
standard, then the presumption that the parties have taken the
uncertain and speculative character of the damages into account
when the contract was made should apply and the stipulated sum
should, accordingly, be deemed liquidated damages. See, Southern
Manhaden Col v. How, supra.