Liquidated Damages

A liquidated damages clause sets a specific dollar amount payable upon breach of contract, agreed to in advance. It substitutes for proving actual damages, useful when the actual loss would be hard to calculate.

Courts enforce a liquidated damages clause only if it reflects a reasonable estimate of probable harm and the actual loss is difficult to determine. If the amount is grossly disproportionate, courts treat it as an unenforceable penalty.

California Civil Code §1671 governs the analysis. We draft liquidated damages provisions that are defensible, anchored to a logical proxy for actual harm, and we litigate enforceability when one side challenges the clause after a breach.