B) The sum is a reasonable compensation for the harm caused.
One criterion to determine whether the liquidated damages clause is a reasonable compensation is that the damages stipulated in advance should not be more than those which at the time of the execution of the contract can be reasonably expected from its future breach so that agreements to pay fixed sums plainly without reasonable relation to any probable damage will not be enforced. Order of AHEPA v. Travel Consultants, Inc., 367 A.2d 119, 126 (D.C. 1976) In Order of AHEPA, 367 A.2d 119 the court concluded that the liquidated damages clause of $100.000 was reasonable taking into account the testimony of expert witness regarding the quantity of trips Travel Consultants could have organized, had the contract not been breached by Order of Ahepa. …show more content…
Vanderbeek v. Barefoot, 226 Fed. Appx. 209, 214 (3d Cir. N.J. 2007) The Vanderbeek, 226 Fed. Appx. 209 case was related to an Asset Purchase Agreement. The company that was going to buy the assets failed to do by the agreed date so the deposit given by that company was kept as liquidated damages. Vanderbeek stated that the liquidated damages clause was not enforceable because it was a penalty. The Court decided that the liquidated damages clause was enforceable. It took into account that both parties were sophisticated organizations that had received advice from a counsel and that they had equal bargaining power. Finally, the Court highlighted that it was the intent of the parties to make the forfeiture of the deposit a liquidated damages