Legal Dictionary of Pakistan

liquidated-damages clause

A contractual provision that determines in advance the measure of damages if a party breaches the agreement. ( Traditionally, courts have upheld such a clause unless the agreed-on sum is deemed a penalty for one of the following reasons: (1) the sum grossly exceeds the probable damages on breach, (2) the same sum is made payable for any variety of different breaches (some major, some minor), or (3) a mere delay in payment has been listed among the events of default. Cf. LIMITATION-OF-REMEDIES CLAUSE; PENALTY CLAUSE.