Liquidated Damages: To avoid risk, parties usually include a liquidation clause that allows the parties themselves to determine what damages will be payable in the event of a breach (as opposed to going to court and making the judge determine this): the parties to an agreement engage in the exercise of attempting to predict financial consequences of breach and stipulate for the payment of an equivalent sum in the event of breach in order to avoid risk of litigation—generally held to be enforceable.
Penalty: Stipulating for a severe penalty in event of other party’s breach in order to pressure them to perform (in terrorem) is generally not enforceable. (If penalty clause is struck down, innocent party is entitled to pursue a claim for damages in breach of contract in the normal fashion.)
Two ways a liquidating clause can be enforced: (1) either it’s a true estimate of the injured parties losses or (2) it’s a penalty clause since the amount of the clause far exceeds the loss the innocent party can prove and is seeking
Test for restrictive covenants = (1) The non compete clause must be reasonable between themselves; (2) The purchaser must have a proprietary interest + (3) Extra part ~PUBLIC POLICY→ even if it is reasonable between the parties, it must be good/fair for the public. If it creates a monopoly
