Liquidated Damages Vs Penalty

Summary

Liquidated damages in contracts are pre-agreed sums meant to compensate for breaches, reflecting a genuine estimate of loss. Under English law, this distinction from penalties is crucial, as penalties are intended to punish and are unenforceable. The clauses emphasis on liquidated damages and not as a penalty ensures enforceability by avoiding punitive interpretations.

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Under English law, liquidated damages are pre-determined sums agreed upon by the parties to a contract, which are intended to serve as a fair estimation of the compensation for a breach. The distinction from penalties is crucial because penalties are unenforceable as they are meant to punish rather than compensate.
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