If a Liquidated Damages Clause Demands an Unusually Large Sum

question 1

Multiple Choice

If a liquidated damages clause demands an unusually large sum that is not related to reasonably-anticipated actual damages,the clause will be held to be void as a(n) :

• A) penalty.
• B) unliquidated damages clause.
• C) Extortion
• D) Blackmail

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Definitions:

Derecognition

The process of removing a financial asset or liability from a company's financial statements, usually because it has been sold, repaid, or no longer meets the criteria for recognition.

Financial Liability

An obligation to transfer cash or other resources as a result of past transactions or events.

Contractual Obligation

A contractual obligation is a duty or responsibility that one party is legally bound to perform under a contract agreement with another party.

Cash Consideration

Payment made in cash during a transaction, as opposed to stock exchange or other non-cash assets.