Reliance Insurance Co. v. Utah Department of Transportation
In Reliance Insurance Co. v. Utah Department of Transportation, 858 P.2d 1363 (Utah 1993), the Court enunciated the test for determining the validity of a liquidated damages clause:
"(1) An agreement, made in advance of breach fixing the damages therefor, is not enforceable as a contract and does not affect the damages recoverable for the breach, unless
(a) the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach, and
(b) the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation." Id. at 1367 (quoting Restatement of Contracts 339 (1932)).