XYZ Corp enters into a contract with ABC Manufacturing for t…
XYZ Corp enters into a contract with ABC Manufacturing for the delivery of custom machinery. The contract includes a clause stating that if ABC is late in delivering the machinery, it must pay XYZ Corp $50,000 for each day the delivery is delayed. The actual estimated damages from a delay are difficult to calculate, but historically, similar delays have only resulted in losses of around $5,000 per day. ABC fails to deliver on time, and XYZ demands payment according to the contract clause. ABC argues that the clause is unenforceable as a penalty. Is the $50,000 per day clause enforceable as a liquidated damages provision, or is it an unenforceable penalty clause? Discuss the factors the court will consider in making this determination.
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