A contract includes liquidated damages of $2,000 per day but caps the total at 10% of the contract value. For a $1.2 million contract delayed 75 days, what is the maximum liquidated damages that can be assessed?
Correct Answer
D) $120,000
Calculated damages: 75 days × $2,000 = $150,000. Contract cap: $1,200,000 × 10% = $120,000. The cap limits damages to $120,000.
Why This Is the Correct Answer
This problem requires calculating both the total liquidated damages based on daily rate and the contract cap, then applying whichever is lower. The daily calculation gives $150,000 (75 days × $2,000), but the 10% contract cap limits damages to $120,000 ($1,200,000 × 10%). Since contract caps are maximum limits, the lower amount of $120,000 applies.
Why the Other Options Are Wrong
Option A: $100,000
This incorrectly calculates liquidated damages as $1,000 per day instead of the stated $2,000 per day (75 × $1,000 = $75,000), showing a misreading of the daily rate.
Option C: $150,000
This represents the uncapped liquidated damages calculation (75 days × $2,000 = $150,000) but ignores the 10% contract value cap that limits the total damages to a lower amount.
Memory Technique
Remember 'CAP means CHOP' - when you hit the percentage cap, you chop off any excess damages above that limit, regardless of how the daily calculation adds up.
Reference Hint
Florida Building Code Chapter 1, Section 107 - Construction Documents and Permits, or contract law sections covering liquidated damages provisions
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