What are liquidated damages?

Liquidated damages usually only exist when there is a contract between two parties. Basically what it means is that the two parties come together and they decide on what money amount is going to be assigned to a specific breach. So, a good example would be a landlord and tenant can agree to a certain amount if the tenant decides to break the lease early. This puts both parties in a place where they understand what their risks are, and it makes resolving any kind of breach a lot simpler.