Liquidate

To adjust or settle an indebtedness; to determine an amount to be paid. Liquidated: adjusted, certain, or settled in respect to amount. Liquidation: the act of determining what amount shall be payable; of adjusting an uncertain indebtedness. Also, in a broader and secondary sense, the comprehensive proceeding of ascertaining and adjusting all the indebtedness of a party, and applying assets to discharge it; as when it is said that a bank has gone into liquidation. A debt or demand is liquidated whenever the amount due is agreed on by the parties, or fixed by the operation of law.

Hargroves v. Cooke, 15 Ga. 321.

Under the English bankruptcy act, 1869, a person in embarrassment, instead of suffering himself to be made a bankrupt, may prevail with his creditors by special resolution to declare that his affairs shall be liquidated by arrangement. A trustee is thereupon appointed, with or without a committee of inspection; and when that is done, the general provisions of the act applicable to the proof of debts, &c., in the case of bankruptcy are made applicable to the proof of debts, &c., in the liquidation. The property of the liquidating debtor vests in his trustee, who has the like powers as a trustee in bankruptcy. The close of the liquidation and the discharge of the liquidating debtor depend upon the creditors, who may make a resolution to that effect in a general meeting. Brown. Liquidated damages are damages the amount of which is fixed or ascertained, as opposed to those unascertained or uncertain.

— The parties to a contract frequently insert a stipulation that the one shall pay to the other some specified sum of money in the event of a breach of the contract; and in such a case it frequently becomes a nice question whether such sum is to be considered in the nature of a penalty merely, and covering the damages which one party may sustain in the event of a breach committed by the other, but liable to be reduced to a sum appearing to be just to the court and jury;

— or whether the full sum specified is to be actually paid to the injured party as liquidated or settled damages, without reference to the extent of the injury sustained.

The general doctrine of the courts is, that the intent of the parties governs; and if the language of the contract and attendant circumstances clearly show that they designed an absolute adjustment of the damages beforehand, their agreement will be enforced. But the courts lean towards treating such agreements as a penalty only, leaving the injured party to prove the actual loss. Thus, if the agreement uses the word penalty, this is usually conclusive that only a penalty was intended. But employing the term liquidated damages does not afford an inference that the parties intended to liquidate them.