In short
A liquidated damages clause sets in advance the damages payable for a breach. It is enforceable if actual damages were hard to estimate when the contract was made and the amount is reasonable.
Key takeaways
- An amount that is a penalty rather than a reasonable estimate isn't enforceable.
- When the clause is enforceable, it replaces actual damages.
- Construction contracts often use a daily amount for late completion.
Where it's tested
REG: Business Law: Contracts — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
On June 1, a merchant seller mails an offer to sell goods. On June 3, the seller mails a revocation. On June 4, the buyer mails an acceptance. On June 5, the buyer receives the revocation. Is there a contract?