A liquidated damages provision is the same as a penalty provision.

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A liquidated damages provision is a contractual provision that defines in advance the damages one party will pay if they breach the contract. The amount of damages is supposed to reflect the actual harm caused by the breach, rather than serving as a punishment or deterrent. In contrast, a penalty provision imposes a punishment or other harsh consequence for breach of contract that may be disproportionate to the actual harm caused. Therefore, a liquidated damages provision is not the same as a penalty provision.

A Liquidated Damages Provision Is the Same as a Penalty