- Leighton Construction entered into a contract with the State of Tasmania to build a new stretch of highway. The estimated cost of the contract was $30,000,000
- There was a liquidated damages clause in the contract which made Leighton liable for $8,000 for each day it was over the deadline.
- Leighton was significantly over the deadline, and when Tasmania tried to enforce the LD clause, they sued, saying it was actually a penalty clause.
- It was a penalty clause (at first instance) but it was NOT a penalty clause at second instance in the supreme court.
- It was not a penalty clause because it was not an “exorbitant”, “unconscionable” etc
- It was comparable to the actual costs which is a key fact
- Aside from the actual cost of hire, you have to look at other factors like how much it costs for the state to keep the roads open (‘notional interest’)
- Public utility is also a consideration
Save this case