Which of the following statements is the best description of 'liquidated' damages?
A)An amount not fixed in the contract and left for the court to determine.
B)An amount awarded to compensate the innocent party for the loss suffered as a result of the breach of contract.
C)An amount based upon a genuine pre-estimate of actual loss flowing from the breach of contract.
D)An amount awarded to punish the party in breach of the contract.

Question

Quizplus · Accepted Answer

Liquidated damages are an amount agreed upon by the parties at the time of contract formation, based upon a genuine pre-estimate of actual loss that may result from a breach of contract. This amount is predetermined and specified in the contract. It is not left for the court to determine and is not meant as a punishment for the party in breach. Therefore, option C is the best description of liquidated damages.

Which of the Following Statements Is the Best Description of 'Liquidated