What Are Liquidated Damages?

An amount or method of determining an amount specified in a contract in relation to certain breaches, subject to applicable law.

What Does Liquidated Damages Mean?

Liquidated damages is a term used where the contract fixes an amount, or a method for calculating an amount, payable in relation to specified breaches such as delay or non-performance.

Why It Matters

A pre-agreed damages figure can make disputes simpler, but its effect is always subject to the contract and the applicable law. The clause should be drafted and read with that in mind.

Related Information

Related legal terms: Breach of Contract, Contract

Related practice area: Corporate & Commercial Law →

Dealing With a Related Matter?

This explanation is a general starting point. If the term matters in a specific situation you are facing, a conversation about your facts can help you decide the right next step.

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This definition provides general information and does not constitute legal advice. Laws change, and their application depends on the facts of a matter. For advice on your specific situation, consult a qualified lawyer.