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)The plaintiff will likely be awarded a judgment for all damages that "naturally and directly flow" from the breach.
B)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 the breach.
C)This clause conclusively determines the amount of damages that the court can award.
D)Liquidated damages only apply to losses caused by excess water,such as floods or tidal waves.
E)This clause requires the injured party to take all reasonable steps to mitigate (lessen)his or her losses.

Question

Quizplus · Accepted Answer

A liquidated damages clause is a provision in a contract that specifies a predetermined amount of damages that must be paid by the breaching party if they fail to perform their obligations under the contract. The effect of such a clause on a plaintiff's claim in a breach of contract action is that 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 the breach. This is because liquidated damages clauses are designed to provide certainty and predictability in situations where it may be difficult to calculate the actual damages suffered by the non-breaching party. However, if the amount specified in the clause is deemed to be a penalty, rather than a genuine estimate of damages, the court may refuse to enforce it.

Which One of the Following Statements Accurately Describes the Effect