CIPS Exam L5M3 Topic 1 Question 28 Discussion

Actual exam question for CIPS's L5M3 exam

Question #: 28
Topic #: 1

[All L5M3 Questions]

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

ALiquidated damages needs to be a 100% accurate figure

BIf damages exceed 500k Parky Parks can apply to the courts to get Slides R Us to pay above this amount

CDamages under the amount of 500k are not required to be paid to Parky Parks

Dliquidated damages is a genuine estimate of loss

Ecosts incurred above 500k will be covered by Parky Parks Ltd

Show Suggested Answer

Suggested Answer: D

'restitution damages cannot be mitigated by the actions of the innocent party' is the untrue state-ment out of these four. The general principle of Restitution Damages is that the innocent party is expected to be proactive in mitigating the consequences of any breach and should not allow costs to spiral out of control. See p. 124

by Gayla at May 18, 2024, 03:02 PM

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Yoko

7 days ago

This is easy - A and D are the correct answers. Liquidated damages don't have to be 100% accurate, but they do need to be a reasonable estimate. Anything above 500k is still owed, and Parky Parks can't just pocket the difference if it's less. Common sense, really.

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Mable

12 days ago

I'm going with D and B. The 500k figure is a genuine estimate, but if the actual damages exceed that, Parky Parks can go to court to get the extra amount. Trying to avoid paying anything under 500k is just silly.

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Refugia

12 days ago

I'm not sure about that. I think it's A and B. The damages need to be accurate and Parky Parks can apply to the courts if it exceeds 500k.

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King

16 days ago

B and C are definitely wrong. The whole point of liquidated damages is to have a predetermined amount that has to be paid, regardless of the actual loss. Anything above 500k would still be owed.

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Glenn

16 days ago

I think A and D are correct. Liquidated damages need to be a reasonable estimate of the potential loss, not an exact figure. Anything above 500k would still need to be paid, as it's a predetermined amount.

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Deandrea

19 days ago

I agree with Danilo. Liquidated damages should be a genuine estimate of loss and costs above 500k will be covered by Parky Parks Ltd.

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Danilo

21 days ago

I think the correct statements are D and E.

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