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From a practical perspective, such liquidated damages clauses are commonly found in many types of contracts, from employment to construction contracts. A number of reasons exist for the popularity of these clauses. First, because of the fears and costs associated with litigation, parties who draft such clauses do so in the hopes that they will preclude the need for litigation. At the very least, a liquidated damages clause may encourage the parties to settle before the trial phase or to provide some evidentiary value at trial. Parties have also used liquidated damages clauses as a mechanism for retaining monies that have been deposited or paid under the contract...
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