UCC Liquidated Damages


When parties enter into a contract, they are often free to add a provision setting damages in the event of a breach. Valid liquidated damages provisions spare judges and juries from wasting valuable resources figuring out the damages following a breach, and there is little judicial reluctance to enforcing liquidated damages provisions. But that does not mean parties can agree to any liquidated damages they want. To be valid, liquidated damages provisions must meet certain tests.