Glossary · Contracts
Liquidated Damages
liquidated-damages-9ccf27fe4d00bf04-2026-07-28
- Type
- Glossary
- Jurisdiction
- National
- Date
- 2026-07-28
- Topic
- Contracts
A contract provision fixing in advance the amount payable if a party breaches, used when actual damages would be hard to prove. Courts enforce these clauses if the amount was a reasonable forecast of likely harm, but strike them down as unenforceable penalties if they are designed to punish rather than compensate. They are common in construction, real estate, and confidentiality agreements.
Definition
A contract provision fixing in advance the amount payable if a party breaches, used when actual damages would be hard to prove. Courts enforce these clauses if the amount was a reasonable forecast of likely harm, but strike them down as unenforceable penalties if they are designed to punish rather than compensate. They are common in construction, real estate, and confidentiality agreements.
Liquidated Damages. A contract provision fixing in advance the amount payable if a party breaches, used when actual damages would be hard to prove. Courts enforce these clauses if the amount was a reasonable forecast of likely harm, but strike them down as unenforceable penalties if they are designed to punish rather than compensate. They are common in construction, real estate, and confidentiality agreements. Example: The construction contract set liquidated damages of $5,000 for each day the project ran past the completion date.