“Under Texas law, the inquiry to determine whether a liquidated damages clause is an unenforceable penalty requires three questions: (1) At the time of contracting, did the clause reasonably estimate the harm that would result from a breach; (2) Were actual damages difficult to predict when the contract was made; and (3) Whether, at the time of the breach, the liquidated damages provided in the contract exceeded the actual damages incurred?1 The first two questions require consideration of the information available at the time the contract was executed, i.e., whether the provision was an unenforceable penalty from the beginning. The last question relies on the premise that a provision not designed to be a penalty can nevertheless operate as one, based on the circumstances arising at the time of the breach.”
