Which of the following statements is true about liquidated damages?

Liquidated damages are a specific type of compensation predetermined in a contract, reflecting the parties' expectations around potential future losses due to delays. The true statement is that liquidated damages are determined at the time of contract signing based on estimated owner losses. This means that both parties assess possible risks and agree on a fixed sum that will be owed if contractual obligations, particularly timelines, are not met.

This provision serves several purposes: it provides a clear incentive for contractors to complete the project on time, eliminates the need for complicated damage assessments after a delay occurs, and offers a measure of certainty to both parties regarding potential financial implications in case of delays. This pre-determined amount helps facilitate the smooth operation of the contract and mitigates disputes over the extent of damages after the fact.

The other options do not accurately capture the nature of liquidated damages. They portray misunderstandings about when and how these damages are calculated or apply within the context of contract law. For instance, determining damages at the end based on actual losses would be more akin to general damages, which can vary greatly and are not pre-set in the contract.