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Red Flag Alert: Liquidated Damages Terminology in Agreements

Liquidated damages provisions can be unfair and burdensome for businesses. You should always avoid a point-of-sale software company or merchant processor that has liquidated damages terminology in their agreement. 

Liquidated damages are a type of penalty that a business may be required to pay if they breach a contract or fail to fulfill their obligations under the agreement. These damages are typically specified in advance in the contract, and they are intended to compensate the other party for any losses or damages that they may incur as a result of the breach. 

Unfortunately, they can be problematic for businesses because they can be excessive and disproportionate to the actual losses or damages that the other party may have incurred. In some cases, businesses may be required to pay fees that are so much higher that it causes a significant financial burden. 

These provisions also tend to be difficult to challenge or dispute, because once you’ve signed the contract, you’ve consented to the responsibility. This means that businesses may have little recourse if they believe that the liquidated damages are excessive or unfair. 

Therefore, it is advisable to avoid all contracts, especially with point of sale and merchant processing companies, that include liquidated damages clauses. These companies sell themselves as making your life easier and these conditions do just the opposite by creating financial and legal risks.

Be sure to carefully review agreements before signing and keep an eye open for language related to liquidated damages.