What is Liquidated Damages?
Quick answer
Liquidated damages are a pre-agreed dollar amount payable if a party breaches — commonly used when actual damages would be hard to calculate.
Liquidated damages are a pre-agreed dollar amount payable if a party breaches — commonly used when actual damages would be hard to calculate. Courts will strike down amounts that look more like penalties than reasonable estimates.
Examples
- $1,000/day late-delivery penalty on a construction project.
- A fixed buyout fee for terminating a SaaS contract early.
- Per-unit damages for a missed manufacturing milestone.
Why this matters
BeforeSigning surfaces liquidated damages so you can stress-test worst-case exposure before you sign.
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Frequently asked questions
What is Liquidated Damages?
Liquidated damages are a pre-agreed dollar amount payable if a party breaches — commonly used when actual damages would be hard to calculate. Courts will strike down amounts that look more like penalties than reasonable estimates.
When does Liquidated Damages matter?
BeforeSigning surfaces liquidated damages so you can stress-test worst-case exposure before you sign.
What's an example of Liquidated Damages?
$1,000/day late-delivery penalty on a construction project. A fixed buyout fee for terminating a SaaS contract early. Per-unit damages for a missed manufacturing milestone.
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