If the law of liquidated harm is confusing to judges, it can be downright foolish for clients who often want to include a provision for liquidated damages in their contracts, not to provide a reasonable estimate of potential damages, but to motivate the other party to occur. If the agreed damages are serious enough, the other party will be all the more reluctant to violate it. While there is nothing wrong with using liquidated damage to motivate the other party to do so, customers need to understand that the amount of damage liquidated cannot be taken into the air – it must have an appropriate connection with the actual damages that are expected, or in fact. The transaction contract in the Smelkinson Sysco/. Harrell, 162 Md.App. 437 (2005) provides a model for an enforceable determination of damages. In this case, a former employee agreed not to denigrate his former employer and to help non-salary third parties pursue the lawsuit against the company. It is important that, in the event of a breach of the provision, he has been authorized to recover damages related to the breach, including, but not limited to the amount he received when paying his claims. He also agreed that these non-exclusive prejudices “are not a sanction, but are fair and appropriate given the difficulty of proving bias to his former employer in the event of an infringement.” Instead of including a provision that could be liquidated, which can later be considered unenforceable, the parties should instead consider including in their transaction agreement a provision of damages consistent with the provision. Such an agreement cannot be subject to the same verification to determine whether the damage is a sanction. For a list of the types of damages that can be claimed for breach of contract, see the parties who often intend to design contracts engraved in stone the exact amount of the dollar of damage that is awarded in the event of an infringement, commonly referred to as liquidated damage. The idea is that in the event of an infringement, this provision renders it unnecessary for the aggrieved party to prove actual damages. The benefits of such a provision – the promotion of safety and the repair of trial costs for proof of damage – are obvious.
However, a court may consider that a provision for damages that can be liquidated is not applicable if it considers the amount of damage it provides to be a penalty. This can occur when the amount of damage liquidated is greater than the amount of damage reasonably expected in the event of an infringement at the time of the contract. The parties have finally settled their dispute and agreed on an agreement. All that remains is the draft agreement. A damages clause that is likely to be liquidated has three main characteristics: (1) clear language providing for the payment of a specified amount in the event of an infringement; 2. The amount must be an appropriate remedy for the expected damages of the breach, measured prospectively at the time of the creation of the contract and not at the time of the breach; and (3) a binding agreement before the circumstance, which must not be amended to reflect the actual damages found after the fact. For lawyers steeped in the tradition of contractual freedom, a rule that denies a freely negotiated provision may seem confusing. The esteemed former judge Richard Posner called the liquidated damages law “mysterious” and said, which has inspired many lawyers: “I find it difficult to understand why the law should have an interest in whether the estimate of the damage that is the basis for the dissolution of the damages is appropriate.