A liquidation of damages clause is valid if it:

Question

Quizplus · Accepted Answer

A liquidation of damages clause is valid only if it reasonably attempts to estimate the actual harm caused by a breach. It cannot be a punitive measure, but rather should be designed to compensate the non-breaching party for the actual losses suffered. It also does not necessarily have to be agreed to by both parties, as long as it is not unconscionable or against public policy. There is no specific cap on the amount that it can be, but it must be reasonably related to the actual damages that would result from a breach.

A Liquidation of Damages Clause Is Valid If It