Compensation for damages

Liquidated damages

A creditor and a debtor may stipulate that the debtor shall pay to the creditor a specific sum or supply him with some other property benefit, should he fail to perform his non-monetary obligation, or delay in performing it (liquidated damages).

Unless something else results from contract, liquidated damages shall be considered as stipulated for the case of a debtor becoming late in performance.

Liquidated damages shall not be stipulated in relation to monetary obligations.

Method of Calculation

Contracting parties may determine the amount of liquidated damages as they please, either in form of a lump sum or as a percentage, or for each day of delay, or in some other way.

They shall be stipulated in the form prescribed for the contract from which the obligation envisaged by it arises.

Accessory Character

An agreement on liquidated damages shall share the legal destiny of the obligation covered by them.

The agreement shall lose its legal effect should the breach or delay be a consequence of something not attributable to the debtor.

Creditor’s Rights

Should liquidated damages be stipulated for breach of obligation, the creditor may request either the performance of obligation or liquidated damages. He shall lose the right to claim performance of obligation if he requests payment of liquidated damages.

Should liquidated damages be stipulated for breach of contract, the debtor shall not be entitled to pay liquidated damages and repudiate the contract, unless this was the intent of the parties at the moment of stipulating the liquidated damages.

Should liquidated damages be stipulated for the debtor’s delay in performance, the creditor shall be entitled to demand both the fulfilment of obligation and the liquidated damages. The creditor shall not demand liquidated damages due to delay after accepting performance of the obligation and failing to notify the debtor immediately on his reserving the right to liquidated damages.

Reducing the Amount of Liquidated Damages

At the debtor’s request the court shall reduce the amount of liquidated damages if it finds that they are excessively high compared to the value and significance of the subject of obligation.

Liquidated Damages and Compensation for Loss

A creditor shall be entitled to request liquidated damages even should their amount exceed that of the loss sustained by him, as well as if he does not sustain any loss at all.

Should the loss sustained by the creditor be higher than the amount of liquidated damages, he shall be entitled to demand the difference to cover the entire loss.

Compensation Determined by Statute and Liquidated Damages

Should there be a statutory provision specifying the amount of compensation for breach of obligation or delay in performance under the terms: penalty, liquidated damages, compensation and the like, while the contracting parties have stipulated liquidated damages, the creditor shall have no right to request both liquidated damages and compensation provided by the statute, unless this was allowed by the statute itself.

Read more:
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