LIQUIDATED DAMAGES

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 LIQUIDATED DAMAGES
ART. 2226 to 2228, NCC.
▧ Article 2226. Liquidated damages are those agreed upon by the parties to a contract,
to be paid in case of breach thereof.
▧ Article 2227. Liquidated damages, whether intended as an indemnity or a penalty,
shall be equitably reduced if they are iniquitous or unconscionable.
▧ Article 2228. When the breach of the contract committed by the defendant is not the
one contemplated by the parties in agreeing upon the liquidated damages, the law
shall determine the measure of damages, and not the stipulation.

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 LIQUIDATED DAMAGES
Purpose
▧ Liquidated damages are frequently
agreed upon by the parties, either
by way of penalty or in order to
avoid controversy on the amount
of damages.
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Manner of determination
▧ If intended as a penalty in
obligations with a penal cause,
proof of actual damages suffered
by the creditor is not necessary in
order that the penalty may be
demanded (Art. 1228, NCC). No
proof of pecuniary loss is
necessary.
 LIQUIDATED DAMAGES

▧ The parties to a contract are allowed to stipulate on liquidated damages to

be paid in case of breach.
▧ Attached to an obligation in order to ensure performance.
▧ Functions:
1. to provide for liquidated damages
2. to strengthen the coercive force of the obligation by the threat of greater responsibility in
the event of breach.
▧ Proof of the fact of delay in the performance of the obligation is needed.

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 CASE: Atlantic Erectors, Inc. v. Court of Appeals
G.R. No. 170732, October 11, 2012

FACTS:
▧ Respondent Herbal Cove Realty Corporation (Herbal Cove) hired petitioner Atlantic Erectors Inc. (Atlantic) to build
a subdivision project somewhere in Tagaytay City.
▧ The Construction Contract indicated a contract price of almost P16.7Million and to finish building within 180 days.
▧ To secure payment in case of non completion of the project, the contract also provides that the CONTRACTOR
agrees to pay to the Owner liquidated damages equivalent to the One-Tenth of One Percent (1/10 of 1%) of the
Contract Price per calendar day of delay until completion, delivery and acceptance of the said Works by the
OWNER to a maximum amount not to exceed 10%.
▧ Atlantic was asked to commence construction on July 8, 1996, but eventually, it asked for an extension citing bad
weather and delayed turnover of project sites.