Liquidated damages are damages predetermined when parties initially form a contract. At the time of forming the contract, liquidated damages are determined and the compensation amount is calculated that the injured party will receive in the event the contract is breached. Liquidated damages are not to punish the breaching party but rather to put a price on costs that are difficult to determine ahead of time. Parties also have a liquidated damages clause in their contract. This allows the parties to determine the amount the damages will be rather than having the Court determined that amount.