Contracts & ExecutionQuestion 65 of 1605
An owner includes a liquidated damages clause of $500 per day for late completion. This clause is enforceable if:
a.The amount represents a reasonable estimate of actual damages at the time the contract was signed
b.The amount is very high to punish the contractor
c.It is approved by CSLB
d.The contractor waives their right to arbitration
Explanation
Liquidated damages are enforceable if: (1) damages were difficult to estimate at contract signing, and (2) the amount is a reasonable estimate of probable harm — not a penalty.
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Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)