A Court Will Not Enforce a Liquidated Damages Clause When

question 80

Multiple Choice

A court will not enforce a liquidated damages clause when which of the following is true?

• 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:

Drive Axle

An axle that is connected to the drive train and responsible for transferring power from the engine to the wheels.

Ring Gear

Spur gear such as that used on a flywheel for engine cranking, or the outer member of a planetary gearset.

Differential Case

The outer housing that encloses the differential mechanism in a vehicle, protecting its gears and components.

Differential Action

The mechanism in a vehicle's differential that allows two drive wheels to rotate at different speeds while turning, improving traction and handling.