A multi-million dollar contract between a manufacturer and a parts supplier provides for damages of $300 per day for late delivery is void as a penalty contract.

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Quizplus · Accepted Answer

Such a clause is typically considered a liquidated damages clause, not a penalty, if the amount is a reasonable forecast of just compensation for the harm that is caused by the late delivery and is not punitive in nature. Contracts often include liquidated damages clauses to specify a predetermined amount of money that must be paid as damages for failure to perform under the contract, such as late delivery.

A Multi-Million Dollar Contract Between a Manufacturer and a Parts