Smart Computer Services Had a Service Contract with Johnson College

question 11

Multiple Choice

Smart Computer Services had a service contract with Johnson College to maintain all of the college computers used for instructional services. The college depended heavily on its computer system being maintained properly at all times. A liquidated damage clause in the contract provided that Smart Computers pay $500 to Johnson College for each day that Smart was late responding to a service call. On October 10, Smart was notified that Johnson College's computer system failed. Smart, however, did not respond to the college's request until October 15. If Johnson College sues Smart Computer Services under the liquidated damages provision of the contract, Johnson College will

• A) win, unless the liquidated damage provision was determined to be a penalty.
• B) win because, regardless of the circumstances, the liquidated damages provision is valid.
• C) lose, because Smart's breach is only a minor.
• D) lose, because the liquidated damages clause in the Smart/Johnson College contract was against public policy.

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Definitions:

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