10.docx - 1 What does the court here mean when it says that...

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1. What does the court here mean when it says that liquidated damages clauses allow the parties to “allocate and incorporate the risks [of the transaction] in their negotiations”? In all trade contract negotiations, risk allocation is central. Liquified damages include damages the parties determine to collect for compensation in the event of a specific violation during the formation of a contract with the injured party. Precisely because damages are sometimes hard to assess, the parties themselves may indicate the amount to be paid in case of an infringement. Courts will implement the provision of liquidated damages as long as it is difficult to determine the actual damages. A penalty is intended not as a means of compensation for a breach of the contract, but rather as the punishment for an breach, for the purpose of establishing the validity of a contractually liquidated provision of damages regardless of actual damages.

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