Parties to a contract agree in advance to pay ________ damages if the contract is breached.
A) nominal
B) compensatory
C) liquidated
D) consequential

Question

Quizplus · Accepted Answer

Liquidated damages are predetermined damages agreed upon by both parties in the contract to be paid in the event of a breach. The purpose is to specify in advance the amount of damages to be paid and avoid the need for the parties to litigate over damages in the event of a breach. Nominal damages are a small amount awarded to a plaintiff in a lawsuit to acknowledge that a legal wrong has occurred but that the plaintiff has not suffered significant harm. Compensatory damages are designed to compensate the injured party for losses actually incurred as a result of a breach. Consequential damages are damages that arise as a result of the breach but which are not a direct result of the breach itself; they are not typically included in liquidated damages but instead require proof of causation and foreseeability.

Parties to a Contract Agree in Advance to Pay ________