Which One of the Following Statements Accurately Describes the Effect

question 25

Multiple Choice

Which one of the following statements accurately describes the effect of a liquidated damages clause on a plaintiff's claim in a breach of contract action?

• A) This clause requires the injured party to take all reasonable steps to lessen (mitigate) his losses.
• B) The plaintiff will likely be awarded a judgment for all the damages that naturally and directly flow from the breach.
• C) The court will award the amount specified only if it accurately reflects the losses that actually took place.
• D) The court will likely award the amount set out in the clause if it considers that to be a genuine estimate by the parties of the likely consequences of a breach.
• E) Liquidated damages only apply to losses caused by excess water, such as floods or tidal waves.

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Definitions:

Preventive Actions

Measures taken in advance to eliminate or reduce the likelihood of potential problems or risks in processes or operations.

Corrective Actions

Steps taken to eliminate the causes of existing nonconformities or undesirable situations, with the goal of preventing recurrence.

Yardsticks

Standards or measures used for comparison or evaluation.

Objectives

Specific, measurable goals that an organization or individual aims to achieve within a specific timeframe to drive performance.