Oliver 75 - 47th Question

[jyotimayank]

47. Liquidated damages (LDs) are contractually agreed payments in order to...

A. ...give the contractor an incentive to meet an aggressive schedule or challenging quality objectives.
B. ...penalize the contractor for late completion of a project or failure to meet specifications.
C. ...cover the customer's costs caused by late completion or failure to meet specifications by the contractor.
D. ...make a bid or proposal binding for the offerer while the customer has time to select among various bidders.

[sarthy]

C - cover the customer's costs caused by late completion or failure

[jyotimayank]

Yes Option C is the right answer.

Liquidated damages are defined as

Sum of money (agreed-to and written into a contract) specified as the total amount of compensation an aggrieved party should get, if the other party breaches certain part(s) of the contract. The contract also establishes what actions or failures to act constitute a breach. For the agreement to be legally enforceable, the nature of the contract should be such that it is difficult to determine actual damages, and the amount of damages should be reasonable under the circumstances. Otherwise law may regard the specified amount as a fine (included in the contract primarily to force its proper performance) and not a compensation for injury.

Refer to page 362 of PMBOK® Guide Fifth Edition

For more insight of this topic refer to the following video & bolg

Procurement Contract Type | Webinar

http://www.izenbridge.com/videogallery/ ... e-webinar/

Blog on Procurement Contract Type – Legal Relationship Between the Buyer and the Seller Specified!

http://www.izenbridge.com/blog/pmp-proc ... e-webinar/