pay a sum of money; it would seem that he will be compelled to abstain from doing that act, and, just as in the converse case, he cannot elect to break his engagement by paying for his violation of the contract."

§ 118. Thus where two persons entered into articles for the sale of an estate, with a proviso that, if either side should break the contract, he should pay £100 to the other, and the defendant, by his answer, insisted that it was the intention of both parties that, upon either paying £100, the contract should be absolutely void, Lord Hardwicke nevertheless decreed specific performance of the contract to sell. (e) In another case, the condition recited a contract for a settlement comprising a sum of money and also real estate; the penalty was double this sum of money, but had no relation to the real estate; the court granted specific performance of the contract embodied in the condition. (f) And where a father, in consideration of his daughters giving up a part of their interest in the property, agreed to make up their incomes arising out of it to £200 a year, and entered into a bond for the payment of such sum as might be needful for that purpose, and the bond recited the contract, the court took this as evidence of the contract, and accordingly granted relief on the foot of it beyond the bond; (g) and in a case which went to the House of Lords, a contract (contained in the condition of a bond) to give certain property by will or otherwise, was held not to be satisfied by the penalty, but was specifically performed. (h)

§ 119. So, again, a contract not to carry on a particular kind of business within certain limits expressed in the condition to a bond can be enforced by injunction. (¿)

§ 120. (2) The difference between penalty and liquidated damages is, as regards the common law remedy, most material. For according to common law, if the sum named is not a penalty, but the agreed amount of liquidated damages, the contract is satisfied either by its performance or the payment of the money. (j) But as regards the equitable

(e) Howard v. Hopkins, 2 Atk., 371. (f) Prebble v. Boghurst, 1 Sw., 309. (g) Jeudwine v. Agate, 3 Sim., 141.

h) Logan v. Wienholt, 7 Bli. (N. S.), 1; 1 Cl. & Fin, 611. See, also, Butler v. Powis, 2 Coll, 156.

(i) Clarkson v. Edge, 33 Beav., 227; Gravely v. Barnard, L. R. 18 Eq., 518.

(j) Anon., Hard., 320; Lowe v. Peers, 4 Burr, 2225; Hurst v. Hurst, 4 Ex, 571; Legh v. Lillie, 6 H. & N., 165; Mercer v. Irving, El. B. & E., 563; Atkyns v. Kinneir, 4 Ex., 776.

remedy the distinction is unimportant; for the fact that the sum named is the agreed amount to be paid as liquidated damages is, equally with a penalty strictly so called, ineffectual to prevent the court from enforcing the contract in specie.(k)'

§ 121. The simplest illustration of this is the ordinary case of a stipulation on the sale of real estate that if the purchaser fail to comply with the condition he shall forfeit the deposit, and the vendor shall be at liberty to resell and recover as and for liquidated damages the deficiency on such resale and the expenses. (7) Such a condition has never been held to give the purchaser the option of refusing to perform his contract if he choose to pay the penalty, nor to stand in the way of specific performance of the contract.

§ 122. In French v. Macale (m) Lord St. Leonards fully discussed the law as to compelling the performance of contracts of the kind under discussion. In that case there was a covenant in a farming lease "not to burn or bate the demised premises, or any part thereof, under the penalty of £10 per acre, to be recovered as the reserved yearly rent for every acre so burned." His lordship appears to have considered this increased rent as in the nature of liquidated damages and not a penalty; but, nevertheless, he granted an injunction against the burning, saying after a careful review of the authorities that in every case of this nature the question is one of construction, and that the court will always interfere unless there is evidence of an intention that the act is to be permitted to be done on payment of the increased rent.

§ 123. In one case a deed was executed dissolving a partnership between H. and L., and containing a recital that it had been agreed that the deed should contain a covenant by L. not to carry on the trade within one mile from the old

(k) City of London v. Pugh, 4 Bro. P. C., 395; Webb v. Clark, 1 Fonbl. Eq, 154; French v. Macale, 2 Dr. & War, 296; Coles v. Sims, 5 De G. M. & G., 1; Carden v Butler, Hayes & J., 112; Bird v Lake, 1 H. & M., 111; cf. Bray v. Fogarty, I. R. 4 Eq., 544.

(7) "A purchaser," said Lord Eldon in Crutchley v. Jerningham (2 Mer., 506), "has no right to say that he will put an end to the agreement, forfeiting his deposit." Cf. Long v. Bowring, 33 Beav., 585. (m) 2 Dr. & War., 269.

1 Liquidated damages.] Where the contract stipulates for the payment of liquidated damages in case of failure of performance, the court may decree specific performance, unless the agreement itself gives an option of payment instead of performance. Hull v. Sturdivant, 46 Me., 44; Dooley v. Watson, 1 Gray, 414; Hooker v. Pynchon, 8 id., 550.

In a subse

place of business "without paying to H., as or by way of stated or liquidated damages," a sum named. quent part of the deed there was an absolute covenant not to carry on the trade within that limit, followed by a proviso that if L. should act contrary to or in infringement of that agreement he would immediately thereupon pay to H. the sum of £1,500 by way of liquidated damages. Notwithstanding the recital and the form used, it was held that L. was not entitled to break the covenant on paying the £1,500, and an injunction was granted. (n)'

§ 124. The same view was put forward, though perhaps in slightly different language, by the lords justices in Coles v. Sims.(0) That was a case in which there were mutual covenants between a vendor of part of his land and the purchaser of that part as to building on the sold and unsold parts, with a stipulation for payment of liquidated damages in case of breach of covenant. On an application for an interim injunction (which was granted), Knight Bruce, L. J., said:(p) “If I were now deciding the cause, I should probably come to the conclusion that in a case where a covenant is protected (if I may use the expression) by a provision for liquidated damages, it must be in the judicial discretion of the court, according to the contents of the whole instrument and the nature and circumstances of the particular instance, whether to hold itself bound or not bound upon the ground of it to refuse an injunction if otherwise proper to be granted; and that in the present case, the circumstances are such as to render it right for the court to grant an injunction." Turner, L. J., added: "The question in such cases, as I conceive, is whether the clause is inserted by way of penalty, or whether it amounts to a stipulation for liberty to do a certain act on payment of a certain sum."

§ 125. Where the contract to do or not to do the act is

(n) Bird v. Lake, 1 H. & M., 111.

(0) 5 De G. M. & G., 1.

1

(P) 5 De G. M. & G., 9.

Injunction.] A bond was given by a clerk to his employer, in the penalty of £1,000, stipulating that the obligor should not carry on the same business within a specified distance. Held, that the bond was not merely to secure the price of doing the business on the clerk's part, but to prevent him from doing An injunction was granted. Howard v. Woodward, 34 L. J. C., 47; Jones v. Heanens, L. R., 4 D. C., 636; see, however, Nobles v. Bates, 7 Cow., 307; Dakin v. Williams, 22 Wend., 201.

it.

distinct from the obligation to pay a sum of money, it seems that either the contract or the obligation may be sued on.

"Where a person," said Lord Romilly, M. R., in Fox v. Scard, (9) "enters into an agreement not to do a particular act and gives his bond to another to secure it, the latter has a right at law and in equity, and can obtain relief in either, but not in both, courts."

§ 126. It is clear that the fact that the contract may be comprised in a bond does not of itself import any election to pay the money and refuse to do the act. (r)

§ 127. (3) In the third class of contracts, which may be distinguished as alternative contracts, the intention is that a thing shall be done or a sum of money paid at the election of the person bound to do or pay.

In these cases the contract is as fully performed by the payment of the money as by the doing of the act, and, therefore, where the money is paid or tendered there is no ground for interference by way of specific performance or injunction.

§ 128. The question to which of the three foregoing classes of contracts any particular one belongs is, of course, a question of construction.' In considering it "the courts must, in all cases, look for their guide to the primary intention of the parties, as it may be gathered from the instrument upon the effect of which they are to decide, and for that purpose to ascertain the precise nature and object of the obligation."(s) Consequently each case depends on its own circumstances, but it may be.noticed that "a court of equity is in general anxious to treat the penalty as being merely a mode of securing the due performance of the act contracted to be done, and not as a sum of money really intended to be paid;"(t) and that, "on the other hand, it is

(q) 33 Beav., 328.

(r) Hobson v. Trevor, 2 P. Wms, 191; Chil liner v. Chilliner, 2 Ves. Sen., 528; Clarkson v. Edge, 33 Beav, 227. "The form of marriage articles by bond does not import election." Roper v. Bartholomew, 12 Pri., 797.

(8) Roper v. Bartholomew, 12 Pri., 821. (t) Per Lord Cranworth in Ranger v. Great Western Railway Co., 5 H. L. C., 94; Astley v. Weldon, 2 Bos. & P., 346.

1 Hacklett v. Alcott, 1 Call., 533; City Bank of Baltimore v. Smith, 3 Gill & John., 265; Moore v. Platt Co., 8 Mo., 467. The intention of the parties, if it can be ascertained, must govern as to whether the sum specified is to be regarded as a penalty, or as liquidated damages. The case, however, must be free from fraud. Durst v Swift, 11 Lexax, 273; Cothreal v. Talmadge, 9 N. Y., 557; Bagley v. Peddie, 16 id., 469. A different rule is held in Michigan. See Jaquith v. Hudson, 5 Mich., 123. In Iowa, the inclination of the court is to regard the amount named as a penalty, where it is doubtful what the parties really intended. Foley v. Keegan, 4 Iowa, 1.

certainly open to parties who are entering into contracts to stipulate that on failure to perform what has been agreed to be done, a fixed sum shall be paid by way of compensation." (u)'

§ 129. On this question it is by no means conclusive that the contract may be alternative in its form, for, nevertheless, the court may clearly see that it is essentially a contract to do one of the alternatives; so that where there was a contract to renew a certain lease, with an addition of three years to the original term, or to answer the want thereof in damages, the court decreed specific performance of the lease,

(u) Ranger v. Great Western Railway Co., 5 H. L. C., 94.

The legal operation of a penalty, properly so called, is not to create a forfeiture of the entire sum named, but only to cover the actual damages occasioned by the breach of contract; and, therefore, on payment of such damages, or in the case of a bond, of the principal and interest actually due, the party who has incurred the penalty will be relieved or discharged from it. But in the case of what is termed liquidated damages, the whole of the precise sum named may be exacted of the party who is in default, and the court will not interfere to relieve him Burr. Law Dict. The theory in courts of equity, in granting relief in cases of penalties, treats them as securities for the conditions of the contract—as a means of securing payment—and it is only on this ground that relief is granted. 1 Fonbl. Eq. B. 1, ch. 6, § 4, note (h). Peachy v. Duke of Somerset, Pre. Ch. 568; Skinner v. Dayton, 2 John. Ch., 535. It is in cases of this kind only—that is, in the nature of a security-that a court of equity will ever enforce a forfeiture. "It is admitted, indeed," says Mr. Justice Story, "that where the condition or forfeiture is merely a security for the non-payment of money (such as the right of re-entry upon non-payment of rent), there it is to be treated as a mere security, and in the nature of a penalty, and is accordingly relievable." Hill v. Barclay, 18 Ves, 58; Wadham v. Calcraft, 10 id., 68; Reynolds v. Smith, 19 id., 140. But if the forfeiture arises from the breach of any other covenant of a collateral nature, as, for example, of a covenant to repair, there, although compensation might be ascertained, and made upon an issue quantum damnificatus, yet it has been held that courts of equity ought not to relieve, but should leave the parties to their remedy at law. Wadham v. Calcraft, 10 Ves., 68; Hill v. Barclay, 16 id., 403; S. C., 18 id., 59; Reynolds v. Pitt, 19 id., 140: Bracebridge v. Buckley, 2 Price's R., 200. In England it is held, that in all cases of forfeiture for the breach of any covenant, other than a covenant to pay rent, no relief ought to be granted, in equity, unless upon the ground of accident, mistake, fraud or surprise, although the breach is capable of a just compensation. Eaton v. Lyon, 3 Ves., 692; Bracebride v. Buckley, 2 Price's R., 200; Hill v. Barclay, 16 Ves., 403; Rolf v. Harris, 2 Price's R., 200; White v. Warner, 2 Meriv., 459; Eden, Injunc., ch. 2, p. 22. In New York it has been held that relief will not be granted for a breach of a condition contained in a lease, unless the forfeiture was incurred through accident or mistake, for which compensation can be made to the other party; or where the forfeiture is in the nature of a mere security for the payment of money. Baxter v. Lansing. 7 Paige, 350. The rule, however, was formerly different. Popham v. Bampfield, 1 Vern., 33; Haywards v. Angell, 1 id., 222; Northcote v. Dake, Ambler's R., 513; Sanders v. Pope, 12 Ves., 289. Though the distinction is, of itself, no ground to support a bill in chancery, yet equity will not refuse to compel performance of a contract in the form of a penal bond, on the ground that the remedy is at law. Telfair v. Telfair, 2 Dessau, 271.