A Court Will Not Enforce a Liquidated Damages Clause When

question 52

Multiple Choice

A court will not enforce a liquidated damages clause when:

• A) the amount specified is too small and considered to be unfair.
• B) the amount of actual damages is significantly greater than the amount specified as liquidated damages.
• C) the amount was agreed to by the parties prior to the existence of an actual breach.
• D) the amount is so large that it is viewed as a penalty.
• E) the actual damages are difficult to determine and compare to the amount specified as liquidated damages.

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Definitions:

Derived Demand

The demand for a factor of production or intermediate good that results from the demand for another intermediate or final good.

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders.

Venture Capital

Capital provided by investors to startups and small enterprises deemed to possess significant potential for long-term expansion.

Well-Established Firms

Companies that have been in operation for a long time and have a firm position in the market.