Liquidated Damages Clause Does Not Permit Automatic Recovery Of Full Amount, Actual Loss Must Be Proven: Delhi High Court

Delhi HC mandates proof of actual loss for liquidated damages recovery, curbing arbitrary claims. The Delhi High Court has ruled that for a party to recover liquidated damages under a contract, they must provide proof of actual loss suffered, even if the contract contains a liquidated damages clause. The court emphasized that such clauses do not permit the automatic recovery of the full stipulated amount without demonstrating that genuine damages were incurred. This decision aims to prevent arbitrary claims for liquidated damages and ensures that compensation awarded is commensurate with the actual harm caused by a breach of contract.