What weight does the parties' label of 'liquidated damages' or 'penalty' carry?
QUESTION
A construction contract sets damages of $500 for each day of delay, and the owner's expected rental loss is about $450 per day. On what ground is the clause enforceable?
QUESTION
Under the Restatement (Second), when is a liquidated damages clause enforceable?
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ANSWER
When the amount is reasonable in light of the anticipated or actual loss and the difficulty of proving loss. Reasonableness may be measured either at formation or by the loss actually caused.