Meaning & use
liquidated damages
Last updated
Meaning
nounplurallegallaw
A sum of money that two parties agree in a contract will be paid if one of them breaks the agreement.
Grammar: Plural in form and used with a plural verb: The liquidated damages are payable on demand.
Patterns
- liquidated damages for something
- pay liquidated damages
- a liquidated damages clause
The building contract sets liquidated damages at $2,000 for each day the project is late.
If the supplier misses the deadline, the buyer can claim liquidated damages.
The judge enforced the liquidated damages clause because the amount was a genuine estimate of loss.
Common combinations
- a liquidated damages clause
- Read the liquidated damages clause before you sign the lease.
- claim liquidated damages
- The owner decided to claim liquidated damages after the delay.
- pay liquidated damages
- The contractor had to pay liquidated damages for the unfinished work.
- liquidated damages for delay
- The contract provides liquidated damages for delay in delivery.
- enforce liquidated damages
- Courts will enforce liquidated damages only if the figure is reasonable.
Synonyms and how they differ
- penalty
- Penalty is a broader word for any punishment for breaking a rule; liquidated damages are a specific contract amount meant to cover loss, not to punish.
- compensation
- Compensation is money paid to make up for a loss and can be decided by a court; liquidated damages are agreed on in advance by the parties.
Word family
- liquidate verb
- To close a business and sell its assets, or to pay off a debt.
- liquidation noun
- The process of closing a company and selling what it owns.
Commonly confused: liquidated damages or damages? liquidated damages or penalty clause?
liquidated damages vs damages
Damages is the general word for money a court orders someone to pay for harm; liquidated damages are a fixed amount already written into the contract.
liquidated damages vs penalty clause
A penalty clause punishes a breach and is often not enforced; a liquidated damages clause is meant to estimate real loss and is usually enforced.
Practice
The contract says the builder must pay $500 for every week the work is late. This money is called ______.
Choose one answer.
Liquidated damages are a fixed amount agreed in the contract for a delay. A penalty fine is imposed by a court or authority, compensation is decided later, and a deposit is money paid in advance, not for a breach.
Make it your own
Write a sentence using “liquidated damages”, then check it and compare it with the examples above.