Final answer:
Liquidated damages are the predetermined monetary compensation set in a contract for losses incurred by the non-breaching party due to a breach of contract, enforceable if they meet legal standards and are not punitive.
Step-by-step explanation:
When a contract includes a provision by which the parties agree to the amount of monetary damages that the breaching party will pay to the non-breaching party in the event a breach occurs, the agreed-upon fixed monetary amounts are called liquidated damages. These are a critical component in contract law as they provide an anticipated, ostensibly fair estimation of actual losses that might result from a breach.
Contractual rights are based on property rights and allow individuals to enter into agreements regarding the use of their property, offering recourse through the legal system in case of a breach.
Liquidated damages are usually enforced by the courts provided they fulfill certain legal requirements and are not considered penal in nature. Therefore, they serve as a tool to quantify damages in situations where actual damages might be difficult to ascertain.