Question

M agreed to buy G’s house for $200,000. The closing was to be held on April 5. G did not have all items removed from the home until April 9. M had to spend $500 on hotel expenses because of G’s breach. The contract had listed that hotel expenses in the event this occurred would be limited to $400. This agreement of capping the hotel expenses at $400 is an example of:

Answer 1

Answer:

Liquidated Damages

Explanation:

Liquidated Damages are provisions made in legal contracts to allow a party recieve payment of an amount of money in case the pre-agreed contract terms are breached.

Liquidated damages are allowed most especially in legal contrcts where the potential losses to one of the parties is difficult to define especially at the formation of the contract.

Since the agreement was for G to remove his property by 5th of April but did not do so until the 9th of April, the $400 agreed upon for the hotel expenses is liquidated damages. In any case, M will still bear a loss of $100, which is the difference between the $500 spent and the $400 agreed as liquidated damages.