Liquidated Damages

Liquidated damages clauses are provisions in a contract in which the parties agree on the amount of damages to be paid in the event of breach instead of having a court decide that issue. This lesson explores whether liquidated damages clauses are enforceable under the tests used in the Restatement, the UCC, and a California statute. The lesson can be run either as an introduction to liquidated damages or as a review after you have completed your study.

Learning Outcomes

On completion of the lesson, the student will be able to:

1. Define liquidated damages.
2. Describe the circumstances in which a court is likely to enforce a liquidated damages clause.
3. Evaluate the policy arguments for and against enforcing liquidated damages.