What if a liquidated damage clause is punitive in nature?
A) The UCC allows punitive liquidated damage clauses but common law does not.
B) The UCC allows punitive liquidated damages as long as the parties negotiated in good faith to include a liquidated damages clause.
C) The UCC allows punitive liquidated damages only in contracts for sale, but not lease contracts.
D) The UCC allows punitive liquidated damages if there were lost profits.
E) Courts will not enforce the liquidated damage clause if it is punitive in nature.

Question

Quizplus · Accepted Answer

Courts generally do not enforce liquidated damages clauses if they are found to be punitive in nature, as their purpose is to compensate the non-breaching party, not to punish the breaching party.

What If a Liquidated Damage Clause Is Punitive in Nature