Liquidated Damages

DEFINITION of 'Liquidated Damages'

Present in certain legal contracts, this provision allows for the payment of a specified sum should one of the parties be in breach of contract.

BREAKING DOWN 'Liquidated Damages'

This is meant as a fair representation of losses in situations where actual damages are difficult to ascertain. These liquidated damages are meant to be fair rather than punitive.

RELATED TERMS
  1. Continuous Contract

    A reinsurance contract that does not have a fixed contract end ...
  2. Sum Certain

    A legal description of the predetermined settlement price for ...
  3. Options On Futures

    An option on a futures contract gives the holder the right to ...
  4. Contract Unit

    The actual amount of the underlying asset represented by a single ...
  5. Voidable Contract

    A formal agreement between two parties that may be rendered unenforceable ...
  6. Bilateral Contract

    A bilateral contract is a reciprocal arrangement between two ...
Related Articles
  1. Term

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  2. Investing Basics

    What is a Forward Contract?

    A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
  3. Options & Futures

    Options on Futures

    Options on futures contracts offer another way for day traders to use options. These are traded on the same exchange as the underlying futures contract. Traders should take care to understand ...
  4. Options & Futures

    Beginner's Guide To E-Mini Futures Contracts: E-Mini Specifications

    Each e-mini contract has certain specifications as outlined by its host exchange. Ticker SymbolEach contract has a ticker symbol, or an arrangement of letters representing the specific contract. ...
  5. Stock Analysis

    Banks Helped By Lower Loan Loss Provisions

    Many banks saw improved credit quality in the first quarter of 2011 leading to lower loan loss provisions.
  6. Mutual Funds & ETFs

    Introduction To Currency Futures

    The forex market is not the only way for investors and traders to participate in foreign exchange.
  7. Options & Futures

    Why Forward Contracts Are The Foundation Of All Derivatives

    This article expands on the complex structure of derivatives by explaining how an investor can assess interest rate parity and implement covered interest arbitrage by using a currency forward ...
  8. Taxes

    The Real Cost Of Natural Disasters

    Earthquakes, hurricanes, oil spills and other disasters have a very real cost, but who foots the bill?
  9. Options & Futures

    Fueling Futures In The Energy Market

    The energy market influences every aspect of our lives, and these four options are its driving force.
  10. Economics

    What is a Promissory Note?

    A written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.
RELATED FAQS
  1. What is a forward contract against an export?

    Understand forward exchange contracts in exporting, and learn the purpose of using a forward contract and its advantages ... Read Answer >>
  2. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
  3. What's the difference between accrued expenses and provisions?

    Read about the differences between accrued expenses and provisions, and why a company might record one over the other in ... Read Answer >>
  4. How are forward contracts regulated in the United States?

    Read about the risks of forward contracts and why they are not readily subject to regulation, including what happens when ... Read Answer >>
  5. What is the difference between a forward rate and a spot rate?

    Learn about spot and forward contracts, how spot and forward rates are used for spot and forward contracts, and the difference ... Read Answer >>
  6. What does the underlying of a derivative refer to?

    Find out more about derivative securities, what an underlying asset is and what the underlying assets refer to in stock options ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center