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A fair and genuine pre-estimated sum of damages likely to result due to breach of contract is termed as
- a)Liquidated Damages
- b)Ordinary damages
- c)Penalty
- d)None of the above.
Correct answer is option 'A'. Can you explain this answer?
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A fair and genuine pre-estimated sum of damages likely to result due t...
Liquidated Damages:
Liquidated damages refer to a pre-estimated amount of damages that parties agree to pay in case of a breach of contract. In other words, it is a fair and genuine estimate of the damages that are likely to result due to a breach of contract. The amount of liquidated damages is agreed upon by the parties before the signing of the contract.
Advantages of Liquidated Damages:
1. Certainty: The parties can avoid the uncertainty of litigation and the need to prove the actual damages caused by the breach of contract.
2. Clarity: Liquidated damages provide clarity to the parties regarding the amount of damages that will be payable in case of a breach of contract.
3. Deterrent: The prospect of having to pay a pre-agreed amount of damages can act as a deterrent to parties who may be considering breaching the contract.
Difference between Liquidated Damages and Penalty:
1. Purpose: The purpose of liquidated damages is to compensate the non-breaching party for the actual loss suffered due to the breach of contract. The purpose of a penalty is to punish the breaching party for the breach of contract.
2. Reasonableness: Liquidated damages must be a fair and genuine pre-estimate of the damages likely to result from the breach of contract. Penalties must not be excessive or unreasonable.
3. Enforceability: Liquidated damages are enforceable if they are reasonable. Penalties are not enforceable.
Conclusion:
In conclusion, liquidated damages are a fair and genuine estimate of the damages likely to result from the breach of contract. They provide certainty and clarity to the parties and act as a deterrent to breaching the contract. It is important to differentiate between liquidated damages and penalties to ensure that the contract is enforceable.
Liquidated damages refer to a pre-estimated amount of damages that parties agree to pay in case of a breach of contract. In other words, it is a fair and genuine estimate of the damages that are likely to result due to a breach of contract. The amount of liquidated damages is agreed upon by the parties before the signing of the contract.
Advantages of Liquidated Damages:
1. Certainty: The parties can avoid the uncertainty of litigation and the need to prove the actual damages caused by the breach of contract.
2. Clarity: Liquidated damages provide clarity to the parties regarding the amount of damages that will be payable in case of a breach of contract.
3. Deterrent: The prospect of having to pay a pre-agreed amount of damages can act as a deterrent to parties who may be considering breaching the contract.
Difference between Liquidated Damages and Penalty:
1. Purpose: The purpose of liquidated damages is to compensate the non-breaching party for the actual loss suffered due to the breach of contract. The purpose of a penalty is to punish the breaching party for the breach of contract.
2. Reasonableness: Liquidated damages must be a fair and genuine pre-estimate of the damages likely to result from the breach of contract. Penalties must not be excessive or unreasonable.
3. Enforceability: Liquidated damages are enforceable if they are reasonable. Penalties are not enforceable.
Conclusion:
In conclusion, liquidated damages are a fair and genuine estimate of the damages likely to result from the breach of contract. They provide certainty and clarity to the parties and act as a deterrent to breaching the contract. It is important to differentiate between liquidated damages and penalties to ensure that the contract is enforceable.
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A fair and genuine pre-estimated sum of damages likely to result due t...
Liquidated damages are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach that means the amount of damages are already estimated at the time of formation of contract
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A fair and genuine pre-estimated sum of damages likely to result due to breach of contract is termed asa)Liquidated Damagesb)Ordinary damagesc)Penaltyd)None of the above.Correct answer is option 'A'. Can you explain this answer?
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