Dictionary of Procurement Terms

Compensation, usually a monetary judgment, awarded to one party in a contract who suffers harm or loss that is the result of negligence or breach of contract on the part of another party. See also: Liquidated Damages, Penalty Charge.

Damages (usually in the form of money) to be paid by a party who breaches all or part of a contract with another party. The amount of damages is agreed upon by all parties to a contract. These damages may be applied on a daily basis for as long as the breach is in effect, but they may not be imposed as an arbitrary penalty. The key to establishing liquidated damages is reasonableness; it is incumbent upon the buyer to demonstrate, through quantifiable means, that damages did occur. See also: Penalty Charge, Damages.

Non-compensatory damages that are awarded in a civil case to punish the defendant for willful or gross misconduct.