liquidated damages refer to the money that should be paid to the other party if one party breaches the contract according to the agreement of the parties or the direct provisions of the law.

the standard of liquidated damages is money, but the parties may also agree that the subject matter of liquidated damages is other property than money. Liquidated damages have the effect of guaranteeing the performance of debts, punishing the defaulter and compensating the losses suffered by the innocent party. Therefore, some countries regard it as one of the measures to guarantee the contract, while others regard it as the way to bear the responsibility for breach of the contract.

Legal definition:

When a party no performance at all fails to perform his debts properly, he must pay the other party a certain amount of money or other property other than money as agreed. Liquidated damages is a kind of contract economy, and it is also an economic sanction for breach of contract. The establishment of liquidated damages is to ensure the performance of the debt, even if the other party has not suffered any property losses, it should also pay liquidated damages according to the provisions of the law or the contract. The standard of liquidated damages is determined according to law or agreed in writing by both parties in the contract. There are two kinds of liquidated damages:

① Punitive liquidated damages, whose function is to punish. If the other party suffers property losses due to breach of contract, the breaching party shall pay the liquidated damages and compensate the other party for the losses.

② compensatory liquidated damages are a kind of pre-estimation of the property losses that one party to a contract may suffer due to the other party's breach of contract, and the liquidated damages are paid, that is, the breaching party is exempted from the responsibility of compensating the other party for the property losses suffered; Even if the loss is greater than the liquidated damages, it will not be compensated. Paragraph 1 of Article 114 of the Contract Law of the People's Republic of China stipulates: "The parties may agree that one party shall pay a certain amount of liquidated damages to the other party in case of breach of contract, or they may agree on the calculation method of the amount of damages caused by breach of contract.