What describes a situation where parties agree on a sum of money which will be enforced in court?

The scenario described pertains to liquidated damages, which is a specific sum of money that the parties to a contract agree upon as compensation for breach of the contract. When liquidated damages are stipulated within a contract, they set a predetermined amount that will be enforceable in court, making it clear to the parties what the cost of a breach will be. This pre-agreed figure eliminates uncertainty and often facilitates smoother transactions by providing a clear consequence for non-compliance.

In contrast, the other types of damages mentioned do not fit this description. Actual damages refer to the real financial loss suffered due to a breach of contract, which may not necessarily have a predetermined figure attached to it. Nominal damages are usually symbolic and represent a small sum awarded when a breach has occurred but where no actual financial loss has been proven. Punitive damages, on the other hand, are intended to punish wrongdoing rather than compensate for lost funds, serving primarily as a deterrent to discourage similar behavior in the future. Thus, the concept of liquidated damages is specifically tied to the idea of a concrete, enforceable sum agreed upon by the parties involved.