Carborundum manufactured an abrasive powder - "ferro carbo" - used in making steel. Under the three-year contract, Carborundum agreed to deliver ferro carbo to Lake River, which agreed to put the ferro carbo in bags and ship it to Carborundum's customers. At Carborundum's insistence, Lake River installed a new $89,000 bagging system to handle the ferro carbo.
The contract contained a liquidated damages clause, which specified that Carborundum would, during the threee-year term of the contract, ship a minimum of 22,500 tons of ferro carbo to Lake River for bagging and distribution, and that, if less than this amount were shipped, Lake River would be entitled to the difference between what it would have been charged for the 22,500 ton minimum and what it was charged for the amount actually shipped.
Yes or No: Assume that it was difficult to ascertain expectation damages at the time of contracting; then, the clause is enforceable provided that the amount of damages specified in the clause was, at the time of contracting, a reasonable estimate of the damages.