What term refers to a sum fixed by contract for breach where actual damages are difficult to measure?

The term that refers to a sum fixed by contract for breach, particularly when actual damages are difficult to measure, is known as liquidated damages. This concept is used in contract law to provide a predetermined amount of compensation that one party will pay to another in the event of a breach. Liquidated damages are typically included in contracts to offer clarity and certainty, helping both parties understand the potential consequences of non-performance.

These damages serve as a way to avoid disputes over the assessment of actual damages, which can sometimes be complex and subjective. By agreeing on a specific amount in advance, parties can streamline the process of resolving breaches of contract. This is particularly useful in scenarios where quantifying actual losses might be complicated, such as in construction contracts or service agreements where downtime or delays can lead to intangible losses.

Compensatory damages, on the other hand, are awarded to compensate the injured party for actual losses incurred, including both economic and sometimes non-economic damages. However, they require a clear quantification of the losses, which is what liquidated damages are designed to bypass.

Punitive damages are awarded in a different context – primarily to punish the wrongdoer and deter similar conduct, rather than to compensate the injured party for their losses. Consequential damages refer