Which damages are specifically pre-determined and defined within the contract?

Liquidated damages are a specific type of compensation agreed upon by the parties at the time the contract is formed. These damages are pre-determined and outlined within the contract itself, enabling both parties to have a clear understanding of the financial implications of a breach of contract.

The concept behind liquidated damages is to provide a fair measure of compensation that takes into account the anticipated harm that would arise from a breach, making it easier to settle disputes without lengthy litigation. In distinguishing these damages, it’s essential to note that they must be reasonable and not punitive; they should reflect a genuine attempt to estimate the damages that would likely result from a breach.

In contrast to other types of damages, such as ordinary damages, which correspond to the actual loss incurred, or nominal damages, which are small amounts awarded when a breach occurs without significant loss, liquidated damages serve the purpose of providing clarity and certainty upfront.

Prefixed damages is not a recognized legal term and can cause confusion. Therefore, liquidated damages stands out as the appropriate term to describe damages that parties have agreed upon in advance as part of their contractual agreement.