Which One of the Following Statements Accurately Describes the Effect

question 33

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 conclusively determines the amount of damages that the court can award.
• B) This clause requires the injured party to take all reasonable steps to mitigate (lessen) his losses.
• C) Liquidated damages only apply to losses caused by excess water, such as floods or tidal waves.
• D) The plaintiff will likely be awarded a judgment for all the damages that "naturally and directly flow" from the breach.
• E) 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 the breach.

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Definitions:

Tax Rate

The rate at which taxes are levied on an individual or a company.

Cost of Capital

The yield a corporation needs to generate from its investment ventures to sustain its market price and appeal to investors.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage.

Short-term Borrowings

Loans or financial obligations that are due for repayment within a short period, typically less than a year.