CIPS Exam L4M8 Topic 7 Question 36 Discussion

Actual exam question for CIPS's L4M8 exam

Question #: 36
Topic #: 7

[All L4M8 Questions]

Describe what should be considered when creating damages terms in a contract.

AExplanation:
Damages are 'sum of money that the supplier pays if it fails to carry out its contractual obligation.
When creating terms for damages in the contract, it should be considered that Damages are categorized into two types (liquidated and un-liquidated). And which or if both are applicable to the contract in hand.
Liquidate Damages are fixed amount of money agreed between the parties that is payable if a contract is breached. For example, knowing that supplier not being able to install a device properly in a power transformer may destroy the device and going ahead to include a fee in the contract if the device was destroyed.
Un-liquidated damages are unfixed amount of money. It is used when the amount of money that will compensate the injured party cannot be known in advance. A court decides the amount when the damages occur. For example, knowing that supplier not being able to install a device properly in a power transformer may destroy the device, other appliances and equipment unknown, cause the buyer delay in the process and reputational damage as in customer dissatisfaction. Yet, unquantifiable as both parties are unable to fix a fee in advance on the damages and leaving it to the court to decide the damage if it may occur.
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by Linn at Jun 03, 2024, 10:43 AM

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Kristel

1 months ago

Ah, the age-old question of 'how much is too much?' when it comes to damages. I bet there's an entire legal seminar on that topic alone. Maybe we could just put a 'damages not to exceed a bazillion dollars' clause in the contract and call it a day.

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Carey

7 days ago

It's all about making sure both parties are protected and the terms are fair and reasonable.

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Leonor

14 days ago

Yeah, you have to think about whether you want liquidated damages, which are fixed, or un-liquidated damages, which are not fixed.

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Juan

30 days ago

That would be nice, but it's important to consider the type of damages when creating terms in a contract.

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Beula

2 months ago

Hmm, I wonder if there's a way to hedge our bets and include both types of damages in the contract? That way, we're covered no matter what happens. Although, I guess that might make the contract a bit... complicated.

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Noemi

1 months ago

Having a clear understanding of the potential risks and consequences can help in determining the best approach for including damages terms in the contract.

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Miss

1 months ago

It's important to carefully consider which type of damages would be most appropriate for the specific situation outlined in the contract.

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Dominga

1 months ago

Including both types of damages in the contract could provide extra protection for both parties, but it might make the contract more complex.

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Timmy

2 months ago

Interesting! The example with the power transformer really helps illustrate the difference between the two types of damages. I'll make sure to keep that in mind when drafting a contract.

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Wava

Un-liquidated damages, on the other hand, are not fixed and determined by the court if needed.

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Gayla

4 days ago

Yes, liquidated damages are a fixed amount agreed upon in advance for breach of contract.

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Susana

1 months ago

It's important to consider whether to include liquidated or un-liquidated damages in the contract.

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Flo

2 months ago

Definitely, understanding the potential consequences of a breach and how damages should be calculated is crucial in contract drafting.

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Anissa

2 months ago

Yes, it's important to consider whether to include liquidated or un-liquidated damages based on the specific situation.

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Serita

2 months ago

Ah, I see. So, we need to consider whether the damages are liquidated or unliquidated, and which one applies to the contract. That makes sense, but I wonder how we determine which type is more appropriate in a given situation.

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