liquidated damages

(law) A sum of money that a contracting party agrees to pay to the other party for breaching an agreement, particularly important in a contract in which damages for breach may be difficult to assess. A manufacturer, for example, that agrees to develop, produce, and sell unique products to a buyer may insist on a contract clause for liquidated damages in the event that the buyer rejects the goods without justifiable reason because the market for resale of the unique goods will be so limited that damages will be difficult to assess.

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