A. An amount contractually stipulated as a reasonable estimation of actual damages to be recovered by one party if the other party breaches the contract.
Listen to pronunciationLegal Definition -
An amount contractually stipulated as a reasonable estimation of actual damages to be recovered by one party if the other party breaches the contract. + If the parties to a contract have properly agreed on liquidated damages, the sum fixed is the measure of damages for a breach, whether it exceeds or falls short of the actual damages. -- Also termed stipulated damages; estimated damages. Black's Law Dictionary® Eighth Edition © 2004
Related terms-
liquidated, adj. 1. (Of an amount or debt) settled or determined, especially by agreement. 2. (Of an asset or assets) converted into cash. Black's Law Dictionary® Eighth Edition © 2004
liquidated-damages clause. A contractual provision that determines in advance the measure of damages if a party breaches the agreement. Black's Law Dictionary® Eighth Edition © 2004
Recent Usage -
"One manner of addressing and avoiding the evidentiary problems associated with establishing and proving damages for lost profits is to incorporate within the supply contract, a 'liquidated damages' provision. If the parties agree in their contract what the damages for a breach shall be, they are said to be liquidated, and, unless the agreement violates some principal of law, the parties are bound thereby. O.C.G.A. § 13-6-7. It is important to note that whereas a liquidated damages clause will be enforceable, a penalty will not." Read more.
Damages for Breach of Contract-Lost Profits Versus Liquidated Damages by Steven M. Mills of Steven M. Mills, P.C