Contracts: debt and damages, liquidated and unliquidated claims

by Practical Law Commercial

A practice note that examines the legal distinction between a debt and damages in contracts and the meaning of "liquidated" and "unliquidated" in relation to contractual claims under English law. This practice note highlights that there is no single, consistent rule for this classification, which often depends on the interpretation of a specific contract or piece of legislation. It explores the main principles for distinguishing between these types of claims, including whether the amount payable is fixed or needs assessment, the nature of the payment trigger as a primary or secondary obligation, and historical legal classifications. The classification has significant practical consequences, which this practice note discusses, in contexts including litigation procedure, remedies for non-payment, the application of rules on mitigation and penalties, rights of set-off, insolvency proceedings, statutory interest claims, and the assignment of claims. The note also considers case law classifying insurance indemnity claims and other indemnities.