A construction contractor entered into a contract to build a family room addition onto Harry's home for $25,000.In order to encourage timely performance,the agreement provided that the contractor would be penalized $2,000 as liquidated damages for each day that the project was late in getting finished.The contractor was 30 days late in finishing the project,but otherwise met the terms of the agreement.What is most likely in this situation?

Question

Quizplus · Accepted Answer

The liquidated damages clause is likely to be considered a penalty because $2,000 per day for 30 days amounts to $60,000, which is excessive compared to the contract price of $25,000. Courts typically do not enforce penalty clauses that are disproportionate to the actual harm caused.

A Construction Contractor Entered into a Contract to Build a Family