NALA Certified Paralegal Practice Exam

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Study for the NALA Certified Paralegal Exam. Use our practice quizzes with multiple choice questions and explanations to enhance your knowledge. Prepare effectively for your certification!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

The parties to a contract may specify a reasonable amount to be paid in the event of a future breach of the contract. These are called _____ damages.

Consequential
Punitive
Liquidated
Compensatory

The correct answer is: Liquidated

Liquidated damages are a predetermined and agreed upon amount of money to be paid in case of a breach of contract by one party. This amount is set to be a reasonable estimation of the damages that the non-breaching party would incur as a result of the breach. This is why options A, B, and D are incorrect. Consequential damages, also known as indirect damages, refer to losses that are not a direct result of the breach but arise as a consequence of the breach. Punitive damages are meant to punish the breaching party and are typically not awarded in contract disputes. Compensatory damages are meant to compensate the non-breaching party for actual losses they have incurred as a result of the breach, but are not predetermined and are instead calculated based on the actual damages suffered. Therefore, liquidated damages are the most appropriate and specific term for the type of damages described in the question.