Stipulated Damages

The sum agreed by the parties to be paid, on a breach of a contract, by the party violating his engagement to the other.

It is difficult to distinguish, in some cases, between stipulated damages and a penalty. The effect of inserting stipulated damages, either at law or equity, appears to be that both parties must abide by the stipulation and the prescribed sum must be given.
   

This entry contains material from Bouvier's Legal Dictionary, a work published in the 1850's.