Liquidated Damages

Liquidated Damages Clause - The Role Uncertainty Plays in Contracts

A liquidated damages clause is a provision that sometimes appears in contracts when it would be difficult for one party to the agreement to calculate damages should the other party decide to breach the contract. However, because there are many rules which vary from state to state as to what is required for a liquidated damages provision to be upheld by a court, not all liquidated damages clauses will able to be enforced. Thus, before you decide to use a liquidated damages provision in your next agreement or sign off on an existing liquidated damages clause, it's important to make sure the clause is drafted properly.