Liquidated Damages

Definition - What does Liquidated Damages mean?

Liquidated damages are sums of money that one party must pay to another party upon the breach of a contract, or upon other injuries or losses sustained.

Typically, liquidated damages are written into contracts before business commences between two parties. They are frequently used when the amount of actual damages is difficult to calculate.

Justipedia explains Liquidated Damages

Liquidated damages are commonly included in contracts in order to make each party feel safer to engage in business with the other party. The reason is because if liquidated damages are included, then each party knows that they can receive them if the other party fails to adhere to the terms of the contract.

Liquidated damages can be pursued in a lawsuit if the party that breached the contract refuses to pay them to the other party in the contract after a breach.

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