Adjustment of Liquidated Damages in International Construction Contracts

Issaei Tafreshi, Mohammad; Shahbazinia, Mortaza; Eskini, Rabia; Ahmadi, Firooz

doi:10.22096/law.2017.27919

Adjustment of Liquidated Damages in International Construction Contracts

Document Type : Scientific Paper

Authors

Mohammad Issaei Tafreshi

Mortaza Shahbazinia ¹

Rabia Eskini ²

Firooz Ahmadi ³

¹ Associate Professor at Law Faculty, Tarbiat Modares University

² Professor of Law at Atomic Sciences Research Center, Organization of Atomic Energy

³ Ph.D. Student of Private Law, Tarbiat Modares University

10.22096/law.2017.27919

Abstract

The main criterion of the evaluation of the damages caused by the delay in the execution of the construction contracts is the fairness of the liquidated damage clause and its proportionality with the actual damage. The parties of the contract must be able to evaluate the damages by forecasting and calculating the actual damages, while avoiding the purpose to punish the party who violates the contract. The main criterion in determining the amount of the liquidated damage is its relative proportional to the actual damages and its fairness, and failure to comply with this criteria will cause the court, by ignoring the contractual agreement, to avoid applying and enforcing the clause and calculates the damages and determines it according to general principles and in some cases adjusting it by interfering in the scope of the parties' agreement. In addition, in accordance with the provisions of most countries and principles of international trade law, if a part of the contract is completed and delivered or, in the case of which the contractor has intentionally delayed, the amount specified is not claimed and the courts are allowed to modify. Article 230 of the Civil Code, which regulates the determination of the amount of damages, is not in accordance with the rules of the other countries and the international customs governing this matter, and also faces serious challenges in national scene. It seems that in order to overcome this problem and prevent its harmful and unfair results, it would be better to consider the clause illegal if the amount is exaggerated or if the party is possessor unduly.

Keywords

: Liquidated damages

Delay

Compensation

Damage

Unjust

Adjustment

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