Practice Quiz

Paralegal Exam Prep

Category - Contracts

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Under what circumstances will a court enforce a liquidated damages clause?
  1. The damages were difficult to calculate at the time the contract was made.
  2. The amount of damages must be nominal.
  3. There is a reasonable relationship between the amount of the liquidated damages and the actual damages.
  4. A and C.
  5. A, B, and C.
Explanation
Answer: D. A court will enforce a liquidated damages clause if the damages were difficult to calculate at the time the contract was made and if there is a reasonable relationship between the amount of the liquidated damages and the actual damages. Liquidated damages are not meant to punish the breaching party. They are meant to fairly compensate the non-breaching party.
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