each case to stand, as far as possible, on its own merits and peculiarities." With these rules may be compared a summary by Lord Dunedin in a recent decision of the House of Lords.73 "1. Though the parties to a contract who use the words 'penalty' or 'liquidated damages' may prima facie be supposed to mean what they say, yet the expression used is not conclusive. The court must find out whether the payment stipulated is in truth a penalty or liquidated damages. This doctrine may be said to be found passim in nearly every case.

"2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage.74

"3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.75

"4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:

(a) It will be held to be penalty if the sum stipulated for extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.76

"(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid." This though one of the most ancient instances is truly a corollary to the last test. Whether it has its historical origin in the doctrine of the common law that when A promised to pay B a sum of money on a certain day and did not do so,

73 Dunlop Pneumatic Tyre Co., Ltd., v. New Garage & Motor Co., Ltd., [1915] A. C. 79, 86.

74 Citing Clydebank Engineering and Shipbuilding Co. v. Don Jose Ramos Yzquierdo y Castaneda, [1905] A. C. 6.

75 Citing Public Works Commis

sioner v. Hills, [1906] A. C. 368, and Webster v. Bosanquet, [1912] A. C.

394.

76 Citing illustration given by Lord Halsbury in Clydebank Case, [1905] A. C. 6.

"Citing Kemble v. Farren, 6 Bing.

141.

B could only recover the sum with, in certain cases, interest, but could never recover further damages for non-timeous payment, or whether it was a survival of the time when equity reformed unconscionable bargains merely because they were unconscionable,—a subject which much exercised Jessel, M. R.,78 is probably more interesting than material.

(c) There is a presumption (but no more) that it is a penalty when 'a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage.' 79 On the other hand:

(d) It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties." 80

§ 785. Reasonable stipulated damages per day for delay are enforceable.

It is commonly provided in building and construction contracts, that there shall be deducted from the contractor's compensation a fixed sum for each day's delay in performing the contract beyond the day fixed therein. Such damages are obviously graded according to the extent of the breach, increasing proportionately with each day's delay. Moreover, each day's delay while unquestionably injurious, is injurious frequently in ways that are difficult to estimate. Accordingly, unless the sum fixed in the contract is very unreasonable the provision is treated as one for liquidated damages.81 But if the

"Wallis v. Smith, 21 Ch. D. 243. 7 Citing Lord Watson in Lord Elphinstone v. Monkland Iron and Coal Co., 11 App. Cas. 332.

Citing Clydebank Case, Lord Halsbury, [1905] A. C. 6, 11; Webster v. Bosanquet, Lord Mersey, [1912] A. C. 394, 398.

$1 Fletcher v. Dyche, 2 T. R. 32. In Clydebank, etc., Steamship Co. v. Castaneda, [1905] A. C. 6, £500 a week

for delay in furnishing war vessels to the Government of Spain, was upheld. So in Wise v. United States, (U. S. Oct. Term, 1918) 39 Sup. Ct. 303, $200 a day for delay in building two laboratories for the Department of Agriculture; in United States v. United Engineering Co., 234 U. S. 236, 241, 58 L. Ed. 1294, $25 a day for delay in constructing a pumping plant; in United States v. Bethlehem Steel Co.,

contract is totally abandoned, the agreed damages cannot be recovered. The provision is construed as applying only to delayed not to abandoned performance.82 And if the daily

86

87

84

or weekly sum stipulated is out of proportion to any possible damage that could be caused by a delay, it will be held penal even for delayed performance. Similarly, for delay by a carrier, the contract may provide for reasonable daily damages; and the common provisions for demurrage in charter parties involve the same principle.85 So in contracts for the sale of goods, or for engaging in competitive business, or other contracts, damages for each day's breach may be fixed. But when a contract is to furnish numerous articles, courts have refused to enforce a stipulation for the same daily damages for total failure to deliver any part of the goods and for a failure to deliver a single one of the articles to be delivered, especially where there has been substantial compliance with the con

April 1 to Oct. 6, when the owner ejected the contractor. Phaneuf v. Corey, 190 Mass. 237, 76 N. E. 718. And in Bedford v. J. Henry Miller, Inc., 212 Fed. 368, 129 C. C. A. 44, damages of $50 a day for 392 days were enforced.

Coen v. Birchard, 124 Iowa, 394, 100 N. W. 48 ($5 a day for building which would rent for $25); Ross v. Loescher, 152 Mich. 386, 116 N. W. 193, 125 Am. St. Rep. 418 ($20 a day on structure costing $825); Cochran v. People's Railway, 113 Mo. 359, 21 S. W. 6 ($50 a day on building costing $18,000); McCann v. Albany, 11 N. Y. App. Div. 378, 42 N. Y. S. 94 ($50 a day, sewer construction); Wheedon v. American, etc., Co., 128 N. C. 69, 38 S. E. 255 ($10 a day for building which would rent for $30 a month); West v. Higgs, (N. C. 1917), 93 S. E. 719; Jennings v. Willer (Tex. Civ. App.), 32 S. W. 24 ($25 a day for house which would rent for $150); J. G. Wagner v. Cawker, 112 Wis. 532, 88 N. W. 599 ($50 a day on $17,000 building); Grant Marble Co. v. Marshall & Ilsley Bank, 164 Wis. 547, 165 N. W. 14. Damages of $10 a day for delay in constructing a house were sustained in DeGraff v. Wickham, 89 Ia. 720, 52 N. W. 503, 57 N. W. 420;

Crawford v. Heatwole, 110 Va. 358, 66 S. E. 46, 34 L. R. A. (N. S.) 587; Reichenbach v. Sage, 13 Wash. 364, 43 Pac. 354. In Baltimore Bridge Co. v. United Rys., etc., Co., 125 Md. 208, 93 Atl. 420, liquidated damages of $25 a day were allowed for 59 days' delay in completing a bridge the total cost of which was less than $7,000, but there were large actual damages due to the interference with the operation of a railway, and in John Cowan, Inc., v. Meyer, 125 Md. 450, 94 Atl. 18, liquidated damages of $95 a day were allowed for about thirty days on a contract for excavation, for which the price was about $10,000.

84 Harmony v. Bingham, 12 N. Y. 99, 62 Am. Dec. 142.

85 Creighton v. Dilks, 49 Fed. 107; Randall v. Sprague, 74 Fed. 274, 21 C. C. A. 334, 33 U. S. App. 464; Baldwin v. Sullivan Timber Co., 20 N. Y. S. 496.

86 Bergheim v. Blænavon, etc., Co., L. R. 10 Q. B. 319; Louisville Water Co. v. Youngstown Bridge Co., 16 Ky. L. Rep. 350.

87 Kimbro v. Wells, 112 Ark. 126, 165 S. W. 645.

88 Morris v. Wilson, 114 Fed. 74, 52 C. C. A. 22.

tract. "Suppose," it has been said, "the contract was to furnish 10,000,000 brick, and the plaintiff had substantially furnished that number, but through inadvertence the delivery was two or three bricks short of the 10,000,000. Would that subject the plaintiff to $50 a day for an indefinite time?" 89 The distinction, however, between a contract for a building and one for building materials is somewhat tenuous. One who contracts to erect a building must procure numerous materials. If he will be unable to finish the building until he obtains all of the numerous articles for which he has contracted, the failure to furnish any substantial amount of the materials will involve corresponding delay in finishing the whole building. In the decision from which the passage above quoted is taken, the general contractor required for the performance of his contract a quantity of terra cotta manufactured according to special designs. If the general contractor is subject to a daily liability for each day's delay in finishing the building, and that delay is due to the failure to obtain all the terra cotta required, the stipulation seems as reasonable when applied to the building materials as when applied to the building itself. The case illustrates the difficulty of laying down any narrower test than the reasonableness in each particular case of the sum agreed upon as compensation for the breach. A lump sum made payable for any delay whatever beyond a stipulated date is ob89 Northwestern Terra Cotta Co. v. 104 Pac. 165, 166, 34 L. R. A. (N. Caldwell, 234 Fed. 491, 505, 148 C. C. S.) 1. A. 257, citing Chicago, B. & Q. R. Co. v. Dockery, 115 C. C. A. 173, 195 Fed. 221; East Moline Co. v. Weir Plow Co., 37 C. C. A. 62, 95 Fed. 250; O'Brien v. Illinois Surety Co., 121 C. C. A. 546, 203 Fed. 436; Heatwole v. Gorrell, 35 Kan. 692, 12 Pac. 135, 137; Gower v. Saltmarsh, 11 Mo. 271; Long v. Towl, 42 Mo. 545, 550, 97 Am. Dec. 355; Boulware v. Crohn, 122 Mo. App. 571, 99 S. W. 796, 800; Wilkinson v. Colley, 164 Pa. 35, 30 Atl. 286, 26 L. R. A. 114; Emery v. Boyle, 200 Pa. 249, 49 Atl. 779, 780; Keeble v. Keeble, 85 Ala. 552, 5 So. 149; Madler v. Silverstone, 55 Wash. 159,

In Northwestern Terra Cotta Co. v. Caldwell, 234 Fed. 491, 148 C. C. A. 257, the contract in question was for the manufacture and sale of $13,000 worth of ornamental terra cotta to be used by the purchasers in the construction of a court house for which they were the general contractors. The contract for the terra cotta provided that should the contract not be completed by a fixed date the manufacturer should pay $50 liquidated damages for each day's delay, but should the contract be completed earlier he should receive $50 per day as bonus. The stipulation for damages was held unenforceable.