Liquidated Damages
A pre-agreed dollar amount owed for a specific breach.
What it means
Liquidated damages are a fixed amount the parties agree in advance will be owed for a particular breach — most famously a per-day amount for finishing a construction project late. Courts generally enforce them when actual damages would be hard to calculate and the amount is a reasonable estimate of the likely harm; an amount designed simply to punish can be struck down as a penalty.
Why it matters before you sign
A per-day liquidated damages clause turns every day of delay into a known, automatic cost — know the number, and know what events pause it, before you commit to a completion date.
In a contract, it looks like this
If substantial completion is not achieved by the contract date, the contractor will pay the owner $500 per calendar day as liquidated damages, not as a penalty.
This definition is a general, educational explanation — not legal advice. XOsign provides AI-assisted document tools and does not provide legal advice; consider consulting a qualified attorney for guidance on your specific situation. Requirements vary by state.
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