In a diamond transaction, it would be particularly difficult to draft a liquidated damages clause that a court would view as a "good faith" attempt to preestimate damages. Often, at the time of contracting, the parties themselves are unable to accurately preestimate damages since the actual harm suffered by the promisee in the event of breach depends largely on business decisions made after entering into the contract. For example, even if at the time of contracting nonpayment would neither have bankrupted the promisee nor caused him to default on other obligations, if he subsequently made a large financial commitment in reliance on being paid and then was not, he might suffer tremendous financial and reputational harm, particularly if forced to go to court to obtain a judgment.

XREF: Connects to contract law doctrine on liquidated damages and the difficulty of predicting reasonable forecasts of harm.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 160