Which of the following statements is correct?

Parky Parks Ltd has a contract with Slides R Us for the provision of children’s playground equipment. The contract contains a clause for liquidated damages and puts the figure at £500k.

Which of the following statements is correct? Select TWO
A . Liquidated damages needs to be a 100% accurate figure
B. If damages exceed £500k Parky Parks can apply to the courts to get Slides R Us to pay above this amount
C. Damages under the amount of £500k are not required to be paid to Parky Parks
D. liquidated damages is a genuine estimate of loss
E. costs incurred above £500k will be covered by Parky Parks Ltd

Answer: D,E

Explanation:

The true statements are: liquidated damages is a genuine estimate of loss (it doesn’t need to be a 100% accurate figure, so long as it’s your best estimate) and costs incurred above £500k will be covered by Parky Parks Ltd. That’s one of the disadvantages of stating liquidated damages in a contract for a buyer- if damages total more than this, you have to foot the bill for the rest. See p.30 for more info