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

Question

Quizplus · Accepted Answer

A liquidated damages clause specifies a predetermined amount of money that must be paid as damages for failure to perform under a contract. The court will likely award the amount set out in the clause if it considers that amount to be a genuine pre-estimate by the parties of the likely consequences of a breach, not a penalty. This encourages parties to accurately assess and agree upon potential damages at the time of contract formation.

Which One of the Following Statements Accurately Describes the Effect