An owner includes a liquidated damages clause of $500 per day for late completion. This clause is enforceable if:
Explanation
Civil Code §1671(b) makes a liquidated damages provision valid unless the party attacking it establishes that the amount was unreasonable under the circumstances existing at the time the contract was made, so reasonableness is judged as of signing. An amount set high to deter or punish is the classic penalty that fails that test. Requiring proof of the exact actual damages defeats the purpose of liquidating them in advance. And initialing the clause or waiving arbitration has nothing to do with §1671.
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