In a lawsuit for damages due to default, when can a party claim liquidated damages?

Liquidated damages are a specific sum outlined in a contract that a party agrees to pay if they fail to meet certain obligations or if a breach occurs. This predetermined amount is intended to represent a genuine estimate of the damages that would be incurred due to the breach, thus providing both parties with clarity and assurance about the consequences of default.

When a contract explicitly states a specific amount to be paid in the event of a breach, the injured party can claim that amount as liquidated damages. This is especially important in situations where actual damages may be difficult to quantify or prove, allowing for a streamlined process in the event of a dispute. The courts typically enforce liquidated damages clauses as long as they are reasonable and not viewed as punitive.

The other options present scenarios that do not necessarily meet the conditions for claiming liquidated damages. For example, the failure to make a profit does not directly relate to the predefined terms of payment for breach in a contract. Similarly, while the difficulty of proving damages can be a consideration in some contexts, it is not a standalone condition for liquidated damages to be applicable. Additionally, verbal contracts can still theoretically include liquidated damages, but enforceability is often more complex and does not inherently guarantee the same clarity or terms that a written