Cengage Advantage Books: Essentials of Business Law 5th Edition by Jeffrey Beatty,Susan Samuelson

Exercise 13

CPA QUESTION Master Mfg., Inc. contracted with Accur Computer Repair Corp. to maintain Master's computer system. Master's manufacturing process depends on its computer system operating properly at all times. A liquidated damages clause in the contract provided that Accur would pay $1,000 to Master for each day that Accur was late responding to a service request. On January 12, Accur was notified that Master's computer system had failed. Accur did not respond to Master's service request until January 15. If Master sues Accur under the liquidated damage provision of the contract, Master will:
(a) Win, unless the liquidated damages provision is determined to be a penalty
(b) Win, because under all circumstances liquidated damage provisions are enforceable
(c) Lose, because Accur's breach was not material
(d) Lose, because liquidated damage provisions violate public policy