First Construction Company Agrees to Build a Complete Assembly Line

question 37

Multiple Choice

First Construction Company agrees to build a complete assembly line for Plastic Moulds Inc. by April of that year. A term of the contract states: "If First Construction fails to complete the assembly line by April 1, it will pay Plastic Moulds the sum of $5,000 per day until completion. This sum is agreed by First Construction to be liquidated damages and not a penalty." Plastic Moulds knows that its real damage will likely be $500 per day, but it wants to give First Construction a little incentive to make the deadline. However, First Construction is late. Which of the following is true?

• A)The clause is enforceable because the parties have agreed that it is a liquidated damages clause.
• B)The clause is enforceable because Plastic Moulds is entitled to use it to provide incentive to First Construction.
• C)The clause is not enforceable because it is not a genuine pre-estimate of damages.
• D)The clause is enforceable because it is a genuine pre-estimate of damages.
• E)Both A and D

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Definitions:

Elephanta

An island near Mumbai, India, known for its cave temples that are carved out of rock and dedicated to the Hindu god Shiva.

Sandstone Relief

A sculptural technique where the figures and motifs are carved slightly above the background, often found in ancient buildings and monuments.

Creative Aspect

The element of creativity involved in producing something original or imaginative in the arts, literature, or other forms of expression.

Vishnu

A principal Hindu deity, worshiped as the protector and preserver of the universe, often depicted with blue skin and holding a conch, discus, lotus, and mace.