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Liquidated damage is meant to penalize the nonbreaching

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Morgan signs a contract with Shane agreeing to work with him for a movie. Halfway through the production of the movie, Shane decides to quit as he gets another job as a marketing executive. The printed terms in the contract state that when a breach of contract occurs, the breaching party has to pay $20,000 to the nonbreaching party. The contract also has additional handwritten terms that state that in the event of a party being unable to complete the performance required due to unforeseen, unnatural causes, the breaching party does not have to pay any money to the nonbreaching party. Which of the following statements is true in this situation?

Answer choices:

  • Shane has to pay Morgan $20,000 as consequential damages.
  • Shane has to pay $20,000 to Morgan for breach of contract.
  • Shane does not have to pay any amount to Morgan because his breach was excused by the contractual terms.
  • Morgan cannot sue Shane for the breach as the liquidated damage is meant to penalize the nonbreaching party.
  • Shane can sue Morgan for compensatory damages.

Reference no: EM132482389

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