If the parties agree on the amount of damages that will be paid to the injured party if the other party fails to perform, this amount is known as illusory damages.

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This amount is known as liquidated damages. Illusory damages refer to a situation where the damages agreed upon in the contract are so small that they do not actually provide a meaningful remedy for the injured party in the event of a breach.

If the Parties Agree on the Amount of Damages That