A enters into a contract with B to provide surface material for A’s tennis courts by April 1 for a tournament to begin May 1. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is
A. an excessive estimate of the loss on a breach.
B. a reasonable estimate of the loss on a breach.
C. designed to penalize the breaching party.
D. intended to quickly provide cash to the nonbreaching party.
Answer:B
A enters into a contract with B to provide surface material for A’s tennis courts by April 1 for a tournament to begin May 1. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is
A. an excessive estimate of the loss on a breach. B. a reasonable estimate of the loss on a breach. C. designed to penalize the breaching party. D. intended to quickly provide cash to the nonbreaching party.