Written binding contract.
(xi) Written binding contract. For purposes of this paragraph (d)(2)(xi), a contract is a written binding contract if it is enforceable under state law against the taxpayer or a predecessor and does not limit damages to a specified amount (for example, by use of a liquidated damages provision). For this purpose, a contractual provision that limits damages to an amount equal to at least five percent of the total contract price will not be treated as limiting damages to a specified amount. For additional guidance regarding the definition of a written binding contract, see 1.168(k)-2(b)(5)(iii).