Which one of the following statements accurately describes the effect of a liquidated damages clause on a plaintiff's claim in a breach of contract action?
A) Liquidated damages only apply to losses caused by excess water, such as floods or tidal waves.
B) The plaintiff will likely be awarded a judgment for all the damages that "naturally and directly flow from the breach."
C) The court will likely award the amount set out in the clause if it considers that to be a genuine estimate by the parties of the likely consequences of a breach.
D) This clause requires the injured party to take all reasonable steps to lessen (mitigate) his losses.
E) The court will award the amount specified only if it accurately reflects the losses that actually took place.

Question

Quizplus · Accepted Answer

A liquidated damages clause sets out a specific amount of damages that will be awarded in the event of a breach. The purpose of such a clause is to avoid the need for the parties to prove the actual damages suffered as a result of the breach. If the court determines that the amount set out in the clause is a genuine estimate of the likely consequences of a breach, it will likely award that amount to the plaintiff. However, if the amount in the clause is deemed by the court to be excessive or unreasonable, it may not enforce the clause and instead award damages based on the actual losses suffered by the plaintiff as a result of the breach. Therefore, choice C accurately describes the effect of a liquidated damages clause on a plaintiff's claim in a breach of contract action.

Which One of the Following Statements Accurately Describes the Effect