7.4k views
4 votes
Which of the following is the best example of a situation where Segerstrom would be entitled to liquidated damages?

A. Sandoval entered into a contract with Segerstrom which stated that Sandoval was required to pay $25,000.00 to Segerstrom by March 22, 2023; however, Sandoval then failed to pay any money to Segerstrom.
B. Cruz entered into a contract with Segerstrom which stated that Cruz would refrain from exercising his legal right to smoke cigarettes; however, Cruz then smoked several cigarettes the next day.
C. Sotomayor entered into a contract with Segerstrom which stated that Sotomayor would pay $100,000.00 to Segerstrom in the event of a breach; however, Sotomayor then breached the contract.
D. Rios entered into a contract with Segerstrom which stated that Rios would sell his house to Segerstrom; however, Rios then got an offer of $100,000.00 more from Nguyen so Rios sold the house to Nguyen instead.

1 Answer

5 votes

Final answer:

The best example of an entitlement to liquidated damages is where a contract explicitly states the amount to be paid in the event of a breach, as in Option C where Sotomayor agreed to pay Segerstrom $100,000.00 if they breached the contract.

Step-by-step explanation:

The concept of liquidated damages refers to a predetermined amount of money that is stated in a contract as compensation in case of a breach of the contract. This amount is not a penalty, but an estimation of damages that would result from a breach, and it should be reasonable relative to the anticipated harm caused by such a breach.

The best example of a situation where Segerstrom would be entitled to liquidated damages is in Option C: Sotomayor entered into a contract with Segerstrom which stated that Sotomayor would pay $100,000.00 to Segerstrom in the event of a breach; however, Sotomayor then breached the contract. This scenario illustrates an explicit agreement on the amount to be paid in the event of a breach, which fits the definition of liquidated damages.

Options A, B, and D describe breaches of contract but do not specify if a liquidated damages clause is present. Without an agreed-upon, specified amount to be paid as damages, one cannot infer the right to liquidated damages from these options.

User YannicuLar
by
8.4k points