Which of the following hold true in a case of liquidated damages?
A) For liquidated damages to be lawful, the actual damages must be precisely determined.
B) Liquidated damages are enforceable even if actual damages are later determined to be different.
C) A liquidated damages clause is considered a penalty if actual damages are not determinable in advance.
D) If a liquidated damages clause is found to be a penalty, it continues to be enforceable.

Question

Quizplus · Accepted Answer

In a case of liquidated damages, option B is true. Liquidated damages are enforceable even if actual damages are later determined to be different. If the liquidated damages are not a reasonable estimate of the actual damages, then they are considered a penalty and will not be enforceable. Option A is not entirely true because actual damages do not need to be precisely determined. Option C is partially true, but it is not always the case. In some situations, it is impossible to determine the actual damages in advance, yet a liquidated damages clause may be reasonable. Option D is false because if a liquidated damages clause is found to be a penalty, it will not be enforceable.

Which of the Following Hold True in a Case of Liquidated