Courts will generally enforce liquidated damages clauses:
A) if the specified damages amount to a penalty.
B) provided the damages specified are closely related to the actual damages.
C) if the damages specified amount to a forfeiture.
D) provided exemplary damages are deemed an inadequate remedy.

Question

Quizplus · Accepted Answer

Courts will generally enforce liquidated damages clauses provided that the damages specified are closely related to the actual damages. This means that the specified amount must represent a reasonable estimate of the actual damages that may be incurred by the non-breaching party in the event of a breach of contract. If the specified damages amount to a penalty or a forfeiture, the courts are less likely to enforce the liquidated damages clause. Additionally, exemplary damages are not relevant to the analysis of liquidated damages clauses.

Courts Will Generally Enforce Liquidated Damages Clauses