A contractual provision requiring a party in breach to pay a pre-determined amount to the other party as compensation for the breaching party's failure to perform a specific task or comply with a particular duty or obligation. Parties typically negotiate a liquidated damages provision into a contract where it may be difficult to either:

For a model liquidated damages clause, see Standard Clause, General Contract Clauses: Liquidated Damages. For more information on liquidated damages generally, see Practice Note, Damages for Breach of Commercial Contracts: Liquidated Damages Clause.

For more information on the use of liquidated damages clauses in operations and management agreements, see Practice Note, O&M Agreements: Issues to Consider: Liquidated Damages. For more information on the use of liquidated damages clauses in construction project finance agreements, see Practice Note, Understanding Project Finance Construction Contracts: Liquidated Damages.