If you have ever heard about Yin-Yang you would know that things may be described as positive or negative. Liquidated damages are one of those issues that fall into this. The negative view would see them as a charge you would have to pay if you were late in delivering. The positive view is that liquidated damages serves as a cap on liability for damages. When there is a liquidated damages provision you cannot be charged more than that amount if you are late. If you exclude the clause you could still be liable for damages. The only difference is the other party would need to prove the amount. In the end those damages could be more than the proposed liquidated damages amount.
Whether you should accept liquidated damages or not depends upon several factors:
1. Is the schedule for performance something you can reasonably meet?
2. Do you have the resources to manage and document all the activities that impact the delivery? These could be changes to the scope of work. They could be delays buy the owner or a party working for the owner. It could include force majeure events.
3. Is it a reasonable estimate of the direct damages that they will sustain?
I'm personally more inclined to try to negotiate a lower amount so you cap your liability and push to have a threshold of a number of days late before it triggers the need to pay liquidated damages. If what you sell is a piece of equipment that needs to be shipped and then installed, I would separate the two factors and have two performance measurements. I would make the customer responsible for shipment and import so the on-time measurement for delivery of the product is when it leaves your dock. That way any delays that occur in transit or with the import process don't impact you your performing. For the second deliverable, I would want that schedule to start only after the equipment is at the site and you have bee able to inspect it to ensure that it wasn't damaged in transit. You don’t want the clock for liquidated damages to be ticking if the item was damaged and needs to be replaced!
