SealCoat Paving enters into a contract with Royal Golf & Tennis Club to provide surface material for Royal's tennis courts by April 1 for a tournament to begin May 1. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is:

Reasonable amount estimation of the damages caused by the breach of the contract

Explanation:

The contract law says that the penalty if is reasonable estimation of the damage caused then it can be incorporated in the contract otherwise it is unjustifiable and also not enforceable clause. So the penalty amount set in the contract must be reasonable to be claimed by the damage bearing party.

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