An estimate of the damages from a breach must be set when the contact is formed due to the difficulty of estimating the damages that would result from a breach.
What is the liquidated damages clause?
Related Content. A contractual provision requiring a party in breach to pay a pre-determined amount to the other party as compensation for the breaching party's failure to perform a specific task or comply with a particular duty or obligation.
How do you know if a liquidated damages clause is valid?
In determining whether a liquidated damage provision is enforceable, a court will look at whether the amount of the liquidated damage is reasonable in light of either:
(1) the anticipated loss at the time the contract was entered into; or
(2) the actual damages caused by the breach.
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