Question

Renew Turf, Inc., enters into a contract with Sports Park to provide surface material for Sports Park's baseball fields by October 1 for a series to begin October 5. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is:

a. meant to pay for additional liquid sealant in the event of damage
b. a reasonable estimate of the loss on a breach
c. designed to penalize the breaching party
d. intended to quickly provide cash to the non-breaching party

Answer 1

Answer:

b.

Explanation:

Based on the information provided within the question it can be said that this is a liquidated damages clause if the amount is a reasonable estimate of the loss on a breach. This a safety feature placed in order to recover money lost on the negligence of the party that breached the contract, so that the other party does not suffer much loss.