Contracts
What is 'liquidated damages clause' in a Rhode Island purchase agreement, and when is it enforceable?
AIt is always enforceable
BIt is enforceable when the pre-agreed amount is a reasonable estimate of actual damages, not a penalty✓ Correct
CIt is enforceable only in commercial transactions
DIt requires court approval to be enforceable
Explanation
A liquidated damages clause is enforceable in Rhode Island when the damages were difficult to estimate at the time of contracting and the amount is a reasonable forecast of actual damages—not a punitive penalty. Earnest money as liquidated damages for buyer default is common.
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