A Enters into a Contract with B to Provide Surface

question 25

Multiple Choice

A enters into a contract with B to provide surface material for A's tennis courts by April 1 for a tournament to begin May 1. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is

• A) an excessive estimate of the loss on a breach.
• B) a reasonable estimate of the loss on a breach.
• C) designed to penalize the breaching party.
• D) intended to quickly provide cash to the nonbreaching party.

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Definitions:

Account Balances

The amount of money present in an account at any given moment.

Undeposited Funds

An accounting term referring to payments received but not yet deposited in a bank account.

Accounts Receivable

Balances due to a company for goods or services delivered or used but not yet paid for by customers.

Customer Payments

Monies received from customers as payment for goods or services provided by a business.