First Construction Company Agrees to Build a Complete Assembly Line

Multiple Choice

First Construction Company agrees to build a complete assembly line for Plastic Moulds Inc. by April of that year. A term of the contract states: "If First Construction fails to complete the assembly line by April 1, it will pay Plastic Moulds the sum of $5,000 per day until completion. This sum is agreed by First Construction to be liquidated damages and not a penalty." Plastic Moulds knows that its real damage will likely be $500 per day, but it wants to give First Construction a little incentive to make the deadline. However, First Construction is late. Which of the following is true?

A) The clause is enforceable because the parties have agreed that it is a liquidated damages clause.
B) The clause is enforceable because Plastic Moulds is entitled to use it to provide incentive to First Construction.
C) The clause is not enforceable because it is not a genuine pre-estimate of damages.
D) The clause is enforceable because it is a genuine pre-estimate of damages.
E) Both A and D