Contracts & ExecutionQuestion 542 of 1605
A commercial construction contract has a liquidated damages clause of $2,500 per day for late completion. Under Civil Code §1671(b), this clause is presumed:
a.Valid unless the party seeking to invalidate it proves the amount is unreasonable under circumstances existing at contract formation
b.Void as a penalty unless equal to actual daily damages
c.Valid only if it appears in 14-point bold type
d.Void unless approved in advance by the CSLB
Explanation
Civil Code §1671(b) presumes liquidated damages clauses in non-consumer contracts to be valid; the burden is on the party challenging them to prove unreasonableness measured as of the time of contracting. Consumer contracts under §1671(d) are treated more strictly.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)