For example, a builder who does not meet his or her schedule may have to pay a penalty. Sometimes the liquidated damages are the amount of a deposit or a down payment, or are based on a formula (such as 10% of the contract amount). The damages will be considered as liquidated in the following cases: 1. Liquidated damages, on the other hand, are an amount estimated to equal the extent of injury that may occur if the contract is breached. The non-defaulting party may obtain a judgment for the amount of liquidated damages, often based on a stipulation (clear statement) contained in the contract, unless the party who has breached the contract can make a strong showing that the amount of liquidated damages was so "unconscionable" (far too high under the circumstances) that it appears there was fraud, misunderstanding or basic unfairness. By this term is understood the fixed amount which a party to an agreement promises to pay to the other, in case he shall not fulfill some primary or principal engagement into which he has entered by the same agreement it differs from a penalty. When the damages are uncertain, and not capable of being ascertained by any satisfactory or known rule; whether the uncertainty lies in the nature of the subject itself, or in the particular circumstances of the case.
Monetary compensation for a loss, detriment, or injury to a person or a person's rights or property, awarded by a court judgment or by a contract stipulation regarding breach of contract.
Generally, contracts that involve the exchange of money or the promise of performance have a liquidated damages stipulation.
The use and enforcement of liquidated damages clauses have changed over the years.
For example, cases such as Colonial at Lynnfield v.
First, they establish some predictability involving costs, so that parties can balance the cost of anticipated performance against the cost of a breach.