What are Liquidated Damages?

Liquidated damages is made out of a sum of money which is given to the party who didn’t breach the contract. Whenever a contract is written between two or more parties then they usually state what would be considered as breach of contract, or if there are damages which would be hard to assess or it’s hard to decide what is a reasonable amount in certain conditions.

Liquidated damages are made out from complete fairness and punitively. If this amount is not valued right then the law might considered it as a fine and not as a compensation for a sustained injury. When this is the case then it’s considered as unliquidated damages and a court will decide what is the reasonable amount what would be considered as fair.