Law Dictionary

liquidated damages

By this term is understood the fixed amount which a party to an agreement promises to pay to the other, in case he shall not fulfil some primary or principal engagement into which he has entered by the same agreement it differs from a penalty. (q. v.) Vide Damages liquidated.

2. The damages will be considered as liquidated in the following cases: 1. When the damages are uncertain, and not capable of being ascertained by any satisfactory or known rule; whether the uncertainty lies in the nature of the subject itself, or in the particular circunstances of the case. 2 T. R. 32 1 Ale. & N. 389; 2 Burr. 2225 10 Ves. 429; 7 Cowen, 307; 4 Wend. 468. 2. When, from the nature of the case, and the tenor of the agreement, it is clear, that the damages have been the subject of actual and fair calculation and ad-ustment between the parties. 2 Greenl. Ev. §259; 2 Story, Eq. §1318; 3 C. & P. 240; 10 Mass. 450, 462; 6 Bro. P. C. 436; 3 Taunt. 473; 7 John. 72; 4 Mass. 433; 3 Conn. 58; 1 Bouv. Inst. n. 655, 765.

Source : Bouvier 1856