Liquidated damages

Damages that parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach. In most jurisdictions liquidated damages are designed to be a reasonable pre-estimate of the losses that will be incurred rather than a penalty, and are not enforceable if they are unreasonable. 

Disclaimer: The views and opinions expressed in this article are those of the Subject Matter Experts and do not necessarily reflect the official policy or position of The Procurement School.