In our last two articles, we have talked about liability for a breach of contract and under an indemnity. You will recall that in contract law when we talk about liability, we mean liability to pay general damages (ie compensation). However, instead of liability for general damages, the parties may agree in the contract to apply so-called liquidated damages for a breach of a particular obligation.
Liquidated damages are pre-agreed (i.e. agreed in the contract) amounts payable for a breach of a specific contractual obligation.