Explain the concept of liquidated damages with an example

The legal remedy for a breach is often liquidated damages. Assume that Jones breaches a contract with Smith that would have created substantial economic value had they both performed as agreed upon. If a court determines that there was a breach, their contract may specify that Jones pay Smith a particular form of them called expectation damages. These are an amount that leaves Smith as well off as if Jones had not breached. Smith will be paid the amount she expected to gain at the time they made the contract, net of any amount she actually did receive after the breach.