#2 · 2026-08-08 · Legal term
Liquidated damages
UCC § 2-718 allows parties to set damages for breach in advance only at a reasonable amount considering anticipated or actual harm, proof difficulties, and adequacy of other remedies. An unreasonably large amount is void as a penalty.
Rule to remember
A liquidated-damages clause fixes a breach remedy in advance and is enforceable under UCC § 2-718 only if its amount is reasonable under the rule's listed considerations.
Key elements and checks
- An agreed amount payable upon breach.
- Reasonableness in light of anticipated or actual harm and difficulty proving loss.
- No unreasonably large penalty; consider whether other adequate remedies are feasible.
In the source’s words
“A term fixing unreasonably large liquidated damages is void as a penalty.”
UCC § 2-718
This puzzle uses UCC Article 2. Common-law tests and state applications can differ, and a valid clause is distinct from an unenforceable penalty.