Renew Turf Inc. enters into a contract with Sports Park to provide surface material for Sports Park's baseball field by a certain date. The contract specifies an amount to be paid if Renew breaches the deal. This clause is enforceable if the amount is
A)meant to pay for additional work in the event of damage.
B)a reasonable estimate of the loss on the breach.
C)designed to penalize Renew.
D)intended to quickly provide cash to Sports Park.

Question

Quizplus · Accepted Answer

The clause described is a liquidated damages clause, which is enforceable if it is a reasonable estimate of the damages that would be incurred from a breach. This is because it compensates for the loss rather than punishing the breaching party, which is the key factor courts consider in determining the enforceability of such clauses.