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For liquidated damages, or damages specified in a contract, it says they are ok if reasonable if they don't act like a penalty (to be

For liquidated damages, or damages specified in a contract, it says they are ok if reasonable if they don't act like a penalty (to be safe, the liquidated damages should be kept to 10% of contract price). What does it mean that damages would act like a penalty, and why would staying under 10% of the contract price for damages help avoid the liquidated damages clause looking like a penalty?

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