A takes a loan from B with promise to pay it back within six months. It is also stipulated that on the failure to pay within six months. A will be liable to pay double the amount borrowed
A. It is in the nature of penalty so only a reasonable rate of interest can be claimed
B. It is in the nature of liquidated damages, so the stipulated amount can be claimed
C. It is a valid agreement, so A is liable to pay double the amount borrowed
D. It is an unconscionable clause and renders the entire agreement void
Answer: Option B
This Question Belongs to Law >> Negotiable Instruments Act
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