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    Food processing plant and a farmer's cooperative for wheat

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    A food processing plant enters into a contract with a farmers' cooperative for the purchase of several thousand bushels of wheat at $6.50 per bushel to be delivered on November 15. The contract provides that there will be liquidated damages of $10,000 for each bushel of wheat that the cooperative fails to deliver. Which is true?

    a. liquidated damages clauses are always valid if entered into before the acutal breach.
    b. because $10,000 is a relatively small amount, this liquidated damages clause is valid.
    c. the liquidated damages clause would be reformed to $6.50 per undilivered bushel.
    d. this liquidated damages clause is invalid because it is excessive and because actual damages would be easy to compute if the wheat is not delivered

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    Solution Preview

    The answer is (d)

    a) Not everything on the contract is enforceable. When the penalty ...

    Solution Summary

    An option is chosen from a multiple choice question on cooperatives that fail to deliver. Explanation is given.