What is a liquidated damages clause?
Liquidated damages are a pre-agreed amount payable if a contract is breached.
Why it matters
They avoid fights over proof of loss, but must be a real estimate, not a penalty.
Common confusion
A valid estimate is allowed; a punitive “penalty” clause may be struck down.
Frequently Asked Questions
Are they always enforceable?
Only if they reasonably estimate actual harm, not punish.
What if the real loss is higher?
You generally take the liquidated amount, not more.
Can I negotiate them?
Yes, before signing — they are contract terms.