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:

Liability-revenue Relationship

A financial concept that examines the connection between a company's incurred liabilities and the revenue generated over a certain period.

Deferred Revenue

Revenue recorded by a corporation for products or services that have not yet been provided or executed, classified as an obligation.

Accrued Revenue

Income earned but not yet received or recorded at the end of the accounting period.

Shareholders' Equity

The residual interest in the assets of a company after deducting its liabilities, representing the ownership stake of the shareholders.