Liquidated damages often play a significant role in cases of contract breaches. When two parties enter into a contract in Oklahoma, they often include provisions that address what happens if one party fails to meet their obligations. One of the most common remedies is a liquidated damages clause, which sets a specific amount of money that the breaching party must pay if they violate the agreement. But not all clauses are automatically enforceable—and understanding how Oklahoma courts treat these provisions can help you protect your rights in a contract dispute.
What Are Liquidated Damages?
The parties agree on liquidated damages when they form the contract. These pre-determined amounts compensate the non-breaching party for losses that may be hard to measure or prove later in court. Parties often include liquidated damages in construction and other commercial contracts where delays or breaches could cause substantial financial harm.
For example, a construction contract might say that the contractor must pay $500 per day for every day the project goes beyond the agreed completion date.
Are Liquidated Damages Enforceable in Oklahoma?
Oklahoma courts generally enforce liquidated damages clauses only if they meet specific legal standards. Courts will assess the reasonableness of the clause at the time the contract was made—not after the breach has occurred.
Under Oklahoma law, these clauses are enforceable if:
- The actual damages would be difficult or impossible to estimate, and
- The amount chosen represents a reasonable forecast of expected losses—not a penalty.
If the court finds the amount is excessive or punishes the breaching party, it may refuse to enforce the clause. In that case, the non-breaching party must prove actual damages in court to recover compensation.
How Do Courts in Oklahoma Review Liquidated Damages?
When deciding whether to enforce a liquidated damages clause, Oklahoma courts consider:
- The nature and validity of the contract
- The difficulty of estimating losses at the time of signing
- The relationship between the agreed-upon damages and the likely harm from a breach
- Whether the clause serves a legitimate business purpose or is merely punitive
In many cases, courts will uphold a liquidated damages provision if it appears the parties made a good-faith effort to estimate harm and if the agreed amount does not drastically exceed probable losses.
What Happens If There’s No Clause?
If a contract does not include a liquidated damages clause, and a breach occurs, the non-breaching party must prove actual damages. The non-breaching party typically presents evidence, such as invoices, receipts, expert testimony, or financial records, to demonstrate the amount of money they lost due to the other party’s breach of the contract.
Proving damages can be time-consuming and expensive and must occur within the statute of limitations. That’s why many businesses and individuals choose to include provisions in their contracts—to reduce uncertainty and avoid lengthy litigation.
Claremore Business Law Attorneys Can Help
Whether you’re drafting a contract or dealing with a breach, understanding liquidated damages can help you avoid unnecessary risk. Our Rogers County business attorneys navigate the legal process to achieve the best possible outcome for you. For a free consultation with an attorney at Kania Law – Claremore attorneys’ law office, call 918-379-4872. Or you can click here to ask a free online legal question.
