This is an unofficial draft of Article 2B from April 15, 1998. A term fixing unreasonably large liquidated damages is void as a penalty. The Drafting Committee by consensus agreed to delete a restitution formula in current Article 2, but which has had limited or non-existent use.
Terms liquidating damages are one method of allocating risk in a contractual relationship.
If the liquidated damage amount is chosen by the parties based on their assessment of risk at the time of the contract, that choice should be enforced. A court should not revisit the deal after the fact and disallow a contractual choice because the choice later appeared to disadvantage one party. Among other results, this approach indicates that, if the parties actually negotiated the clause, that clause is per se reasonable.