Which option describes a pre-agreed amount regarded as a reasonable estimate of damages?

Which option describes a pre-agreed amount regarded as a reasonable estimate of damages?

• A. Penalty clause
• B. Liquidated damages
• C. Equitable remedies
• D. Executory consideration

Answer: (B)

Liquidated damages are a pre-agreed amount that reflects a reasonable estimate of losses from a breach. This lets both sides know the potential cost upfront and avoids arguments later about calculating damages. The amount must be a genuine forecast of likely harm, not a punishment; if it’s intended to deter breach with a penalty, a court may not enforce it. Equitable remedies involve non-monetary relief like specific performance, not a fixed damages amount. Executory consideration refers to promises that haven’t been performed yet, not to pre-set damages.

Liquidated damages are a pre-agreed amount that reflects a reasonable estimate of losses from a breach. This lets both sides know the potential cost upfront and avoids arguments later about calculating damages. The amount must be a genuine forecast of likely harm, not a punishment; if it’s intended to deter breach with a penalty, a court may not enforce it. Equitable remedies involve non-monetary relief like specific performance, not a fixed damages amount. Executory consideration refers to promises that haven’t been performed yet, not to pre-set damages.