M5D3

Big Bad Wolf Masonry Co. agreed to build a brick home for Johnny Little Pig, the Third by November 1. Big Bad Wolf and Johnny Pig could not predict Pig’s losses if Big Bad Wolf failed to complete the house on time. They estimated that Johnny Pig would lose $150 in storage and rental fees per day if the building was not completed on time. The contract contained a liquidated damage clause. The clause required Big Bad Wolf to pay liquidated damages of $150 per day if the work was completed late. Big Bad Wolf finished the home twelve days late. Johnny Pig actually lost $1,000 because of the breach.

Is the liquidated damage amount stated in the contract between Big Bad Wolf Masonry and Johnny Pig a valid or invalid liquidated damage clause and why? How much in damages can Johnny Pig recover from Big Bad Wolf Masonry Co.?