Because damages are so difficult to prove in court, the parties should consider a liquidated damages clause. Non-lawyers frequently misunderstand the purpose of liquidated damages. They believe that liquidated damages are awarded as a penalty or punishment for wrongdoing. That s not so. Criminal courts mete out punishments.
Civil courts mete out damages.
In civil law, there is no basis for punishing one party for breaching a contract. You can only award damages resulting from such breach. Thus, a liquidated damages clause can not be punitive. If it is punitive, it will be unenforceable. I should point out one drawback to a liquidated damages clause.