Some reasons for using liquidated damages: An owner knows that if the contractor finishes late, the owner needs only a calendar and their fingers (or a calculator) to identify the amount of their damages.
They can use that information to prepare their schedules, deploy their forces, and schedule the timing and sequence of subcontractor work.
Moreover they also know how much they have at risk. This makes proving damages from late substantial completion very hard in most cases.
Frequently you’ll see some formula for liquidated damages.
For instance, $1,000 per day that substantial completion is late.
It differ from a penalty which is a forfeiture from which the defaulting party can be relieved.