noun
penalty for breach of contract; forfeit
A sum of money paid as compensation when a contract is broken. Used in legal, business, and everyday contexts.
契約を解除する場合は違約金が発生します。
If you cancel the contract, a penalty fee will be charged.
彼はアパートの契約を途中で解約して違約金
He broke his apartment lease early and paid a penalty.
損害賠償 refers to compensation for actual damages, whereas 違約金 is a predetermined penalty amount regardless of actual loss.
Compound of 違約 (breach of contract) + 金 (money). The exact historical derivation is uncertain, but the term follows standard Sino-Japanese word formation.