The parties' agreement on the amount of damages to be paid,if one of them breaches their contract,will not be enforced if the amount named is unreasonable.

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Quizplus · Accepted Answer

This is known as a penalty clause, and courts do not generally enforce them as they are seen as a way for one party to exert pressure on the other party to comply with the contract. The amount of damages named must be a reasonable estimate of the actual harm that the non-breaching party would suffer if the contract is breached.

The Parties' Agreement on the Amount of Damages to Be