A court will not enforce a liquidated damages clause when:
A) the amount specified is too small and considered to be unfair.
B) the amount of actual damages is significantly greater than the amount specified as liquidated damages.
C) the amount was agreed to by the parties prior to the existence of an actual breach.
D) the amount is so large that it is viewed as a penalty.
E) the actual damages are difficult to determine and compare to the amount specified as liquidated damages.

Question

Quizplus · Accepted Answer

A court will not enforce a liquidated damages clause if the amount is so large that it is viewed as a penalty, as penalties are not enforceable under contract law. Liquidated damages must be a reasonable estimate of the actual damages anticipated from a breach.

A Court Will Not Enforce a Liquidated Damages Clause When