Liquidated damages constitute the compensation which should be paid in order to satisfy any loss or injury flowing from a breach of a contract. A liquidated damages provision will be sustained if, at the time of the contract, the amount of actual loss is incapable or difficult of precise estimation, and the amount liquidated bears a reasonable proportion to the probable loss. Whether the provision is an unenforceable penalty is a question of law for the court. The party seeking to avoid liquidated damages has the burden to prove that they are an unenforceable penalty. In the absence of any countervailing public policy concerns, freedom of contract prevails in an arm's length transaction between sophisticated parties.
Seymour v. Hovnanian, NY Slip Op 07172 (1st Dep't December 15, 2022)
