A liquidated damages clause is a provision in a contract that specifies a pre-determined amount of money that one party must pay to the other party in the event of a specific breach of the contract. It sets a fixed amount of damages in advance, rather than requiring the parties to prove the actual damages suffered in case of a breach. However, liquidated damages clause should meet the following conditions for it to be enforceable:
i. The liquidated damages amount must be reasonable in relation to the anticipated losses.
ii. The clause should clearly specify the exact amount of liquidated damages to be paid.
iii. The clause should not be contrary to public policy or illegal.
iv. Both parties entering into the contract must freely and voluntarily agree to the liquidated damages clause.

Liquidated damages clause is a contractual provision requiring a party in breach to pay a pre-determined amount to the other party as compensation for the breaching party's failure to perform a specific task or comply with a particular duty or obligation. Parties typically negotiate a liquidated damages provision into a contract where it may be difficult to either; Determine the actual value of services to be performed or estimate the damages that a non-breaching party may suffer if a specific term is breached. The purpose of a liquidated damages clause is to increase certainty and avoid the legal costs of determining actual damages later if the contract is breached.
The liquidated damages clause is enforceable if they are intended to compensate the non-breaching party rather than penalize the breaching party. However, they are not automatically enforceable. Courts routinely refuse to enforce them when they are so disproportionate to anticipated damages as to constitute a penalty. Determining whether the provision is a penalty can be tricky because the court must conduct the proportionality assessment based on the circumstances existing at the time of the contract. If damages are not easily ascertainable, the liquidated damages provision will be enforced as long as it was a reasonable forecast of expected damages.