A predetermined penalty fee assessed for specific breaches of the contract.
By Angel Campa, Founder · Updated March 2026
Liquidated damages clauses set a predetermined penalty for specific defaults, providing certainty for both parties. For tenants, knowing the maximum penalty allows for risk budgeting. For landlords, liquidated damages avoid the cost and uncertainty of proving actual damages in court. However, if the amount is disproportionate to actual likely damages, courts may strike it as an unenforceable penalty.
Found in the "Remedies" section or in specific clauses where breach consequences are defined (e.g., early termination, failure to open for business). May also appear in the construction or opening deadline provisions.
Lextract uses a combination of AWS Textract OCR and Claude AI to identify and extract the liquidated damages from your lease PDF. The AI searches for all pages of the document, then assigns a confidence score based on OCR quality and extraction certainty. Fields with lower confidence are flagged for human review.
Monetary Cure Period
The number of days allowed to remedy missed financial payments after notice.
Non-Monetary Cure
The number of days allowed to remedy operational or physical breaches after notice.
Acceleration Clause
Landlord's right to demand all future rent immediately upon a lease default.
Late Fee %
The penalty percentage applied to overdue rent payments.
Holdover Rate
The multiplier applied to base rent if the tenant remains post-expiration.
Liquidated damages are a reasonable pre-estimate of actual losses that would be difficult to calculate at the time of breach. A penalty is a punishment that bears no relationship to actual damages. Courts enforce liquidated damages clauses but may strike down provisions they deem to be penalties.
Common uses include: early termination fees, late delivery penalties (landlord to tenant), failure to open for business by a certain date (in retail), and construction milestone delays. The clause should explain why actual damages are difficult to ascertain to improve enforceability.
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