Unliquidated damages refer to damages in a breach of contract case that were not predetermined by the party. The concept of unliquidated damages appears in the law in both torts and contract law. It can refer to any damages award a court awards in a breach of contract case. It can also refer to damages in a tort case that are left to the discretion of the judge or jury, such as damages for pain and suffering.
Although the term is used in both contracts and tort cases, it is most commonly used in contract law. Under the law in the US and in most locations, parties can create their own private law by creating a contract. Within the contract, each party exchanges something of value with the other, even if that something of value is just a promise to do something at a later date. The court will enforce the contract made by the parties and will penalize a person who breaches said contract.
When a breach occurs, damages are appropriate. Damages are the amount of money necessary to put the plaintiff in the same position he would have been in but for the breach. Generally, the plaintiff is awarded the dollar value that he can prove he actually lost as a result of the breach. For example, if the plaintiff contracted to buy one widget at $10 US Dollars (USD) and then, as a result of a contract breach, he had to pay $12 USD to buy that widget from someone else, then he could sue the person who breached the contract for $2 USD — his actual loss as a result of the breach.
Sometimes, it can be difficult for a court to determine what damage award is appropriate. This is especially true since speculative losses are not considered. For example, if a person was planning a big sale at his clothing store and the suppliers did not deliver in time, the plaintiff cannot recover the full amount of money he believes he would have made at the sale, since there is no proof such an amount would have actually been made.
Because calculating damages can be difficult, the concept of unliquidated damages and liquidated damages has come into play. Unliquidated damages is a broader term, used to describe situations in which it is unclear exactly how much the plaintiff lost and will recover. Often, in cases where damages are likely to be very speculative, a liquidated damages clause is included. This removes the problem of unliquidated damages because the parties to the contract previously agreed on how much must be paid in the event of a breach.