Which statement is true regarding a liquidated damages clause?
A) A provision for liquidated damages is illegal.
B) A provision for liquidated damages is void because of public policy.
C) A provision for liquidated damages is voidable because of public policy.
D) A provision for liquidated damages is enforceable so long as it is not punitive in nature.
E) A provision for liquidated damages will be enforced regardless of whether it is punitive in nature.

Question

Quizplus · Accepted Answer

A liquidated damages clause is enforceable as long as it is designed to estimate in advance the actual damage that might arise from a breach, and is not punitive. The purpose is to provide certainty and avoid litigation over damages, not to punish the breaching party.

Which Statement Is True Regarding a Liquidated Damages Clause