“Liquidated damages” is an amount of money agreed upon by both parties to a contract that one will pay to the other upon breaching (breaking or backing out of) the contract.

The amount is “liquidated” because it is a fixed amount, which is determined at the time that the contract is formed.


Connecticut General Statutes 42-150u – Enforceability of liquidated damages provision in consumer contracts

(a) No provision in a written contract for the purchase or lease of goods or services primarily for personal, family or household purposes that provides for the payment of liquidated damages in the event of a breach of the contract shall be enforceable unless (1) the contract contains a statement in boldface type at least twelve points in size immediately following such liquidated damages provision stating “I ACKNOWLEDGE THAT THIS CONTRACT CONTAINS A LIQUIDATED DAMAGES PROVISION”, and (2) the person against whom such provision is to be enforced signs such person’s name or writes such person’s initials next to such statement. Nothing in this section shall validate a clause that is a penalty clause or is otherwise invalid under the law of this state.


Several items to note

The contract must be in writing

The contract but be for “personal, family or household purposes.”  This is a consumer contract.

The contract must have in boldface, at least twelve point in size, the appropriate provision.    The statute provides language which needs to be followed to have the liquidated damage provision enforceable

The party who breaches the contract must sign or initial next to the provision.


A party who breeches a contract can always argue that the liquidated damage provision is a penalty which should not be enforced.  Typically, this occurs when the damage clause provides for a damage amount which is clearly far in excess of any damages which may occur from the breech.

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