Aero Consulting purchased a business jet from Cessna. The contract price was $3,995,000 and required a $125,000 deposit from Aero and another $300,000 deposit six months before delivery. A liquidated damages provision stated that Cessna would keep the deposits if Aero failed to pay the remaining balance upon delivery of the aircraft. Cessna tendered delivery of the plane; however, Aero failed to pay the balance and sued for the return of its deposits. The court ruled that the deposits amounted to a fair and reasonable amount of liquidated damages.

CASE QUESTIONS 

1. Why is the liquidated damages clause in this contract not unreasonably low?

2. Why is the liquidated damages clause in this contract not unreasonably high?