Liquidated Damages / Penalty Clause

A penalty clause (liquidated damages clause) fixes in advance the compensation payable for a breach — most familiar as delay damages in construction contracts, often expressed per day or week of late completion. The crucial UAE feature is judicial control: unlike some common law systems, UAE law lets the court adjust the agreed amount to match the actual harm — reducing it if the creditor suffered less, or where the obligation was partly performed — and an aggrieved party may seek more than the clause if it proves greater loss caused by the debtor's fraud or gross fault. The clause therefore sets a strong starting presumption, not an untouchable number. It also spares the claimant from proving the precise amount of loss, which is its practical power. It matters in every delayed project and missed deadline. You meet it in construction and fit-out contracts, supply and service agreements, and employment-related commitments such as training-cost clauses.