Liquidated damages must be directly related to the breach of contract for which they are compensating the non-breaching party.

Name: Liquidated damages must be directly related to the breach of contract for which they are compensating the non-breaching party.
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Liquidated damages should be specifically tied to the breach of contract and the damages suffered by the innocent party. If they are not directly related to the breach, they may be considered a penalty and deemed unenforceable by a court.

Liquidated Damages Must Be Directly Related to the Breach of Contract