being compensated, equity will re- en v. Bowen, 20 Id. 127. Law and
strain the injured party from recover- equity both regard interest as a com-
ing more than a fair compensation, pensation for the injury inflicted by
and will prevent him from exacting delay in the payment of a debt; and
or enforcing a penalty or forfeiture, the statutes of most countries regu-
670 PENALTIES. — FORFEITURES. — LIQUIDATED DAMAGES.
late the amount of this compensation,
and forbid the creditor to stipulate
for anything more; Orr v. Church-
hill, 1 H. Bl. 227, 232 ; Walker v.
Wheeler, 2 Conn. 299; Boicen v.
Bo wen, 20 Id. 127 ; Hughes v. Fisher,
Walker, 516; Deforest v. Bates, 1
Edwards, Ch. 394. This principle
is extended and applied by chancery,
to cases not within positive law, and
relief afforded against penalties or
forfeitures, incurred by the non-pay-
ment of money at a day certain, on
the tender of the sum originally due
with interest; Walling v. Aiken, 3
M'Mullio, Eq. 1; Skinner v. Day-
ton, 2 Johnson, Ch. •"»•'!•"> ; 17 John-
son, 339 ; Hart v. HomiUer, 8 Harris,
248; Webster v. Shipwith, 4 Cush-
man, 341; and the law now pursues,
on this point, a course closely analo-
gous to that of equity; Atkins v.
Chilson, 11 Metcalf, 112; Sanborn
v. Woodman, 5 dishing, 30; Stone
v. Ellis, 9 Id. 95 ; 1 Smith, Leading
Cases, 90, 5th Am. ed. On the other
hand, relief will seldom be given
against a forfeiture incurred by the
non-performance of a collateral act,
however trivial, which is insusceptible
of admeasurement, and therefore of
compensation; Hutchinson v. M'Nutt,
1 Hammond, 14; Dunkleey. Adams,
20 Vermont, 415; unless some spe-
cial ground is shown to justify inter-
ference, or there is reason to believe,
that the forfeiture was intended mere-
ly in terrorem, and was not meant to
be actually enforced. Thus, in Faunae
v. Burke, 4 Harris, 409, a stipu-
lation, that the decision of the en-
gineer of a railroad should be conclu-
sive on all questions between a con-
tractor and sub-contractor, on the line
of the road, and that if he should de-
cide that the work done by the sub-
contractor was not in accordance with
the terms of the contract, or did not
proceed with sufficient rapidity, the
latter should lose all right to go on
with the job, and forfeit twenty per
cent, of the amount due for what had
been accomplished, was held to be in
the nature of liquidated damages, and
not a penalty which could be refused
by the law, or set aside by equity. And
it seems to be admitted, that no relief
can be given against the breach of a
condition precedent, even when the
breach is one which admits of com-
pensation ; Barrett v. The Pa sump-
sit Turnpike Co., 15 Vermont, "â– ">";
The City Bank of Baltimore v.
Smith, 3 Grill & Johnson, 265 ; W> Us
v. Smith, 2 Edwards, Ch. 220; Ro-
binson v. Cropsey, lb. 138.
Although these distinctions may
appear somewhat technical, they are
the best which the nature of the case
admits of. There is no doubt, that
BO far as the rule which forbids a cre-
ditor to recover anything more than
interest, for a delay in the payment
of principal, rests on the assumption,
that interest is a sufficient compensa-
tion fur his disappointment, it must,
as Lord Eldon intimated, often dif-
fer widely from truth, if not from jus-
tice; Henry v. Tupper,3 Williams,
350; ante, 657, 005. But although
it may sometimes fall short of the
equity at which it aims, there are
many instances in which it is neces-
sary to prevent oppression. It is
thoroughly well settled in chancery,
and is now adopted by the courts of
common law, whenever the question
in dispute is one of damages, although
recourse must still be had to equity,
for relief against the forfeiture of an
PEACHY V. DUKE OF SOMERSET. — SLOIMAN V. WALTER. 671
estate in land ; Kemble v. Farren, 6
Bing. 141 ; Davies v. Penton, 6 B.
& C. 216; Homer v. Flintoff, 9 M.
& W. 67S ; Taylor v. Sandiford, 7
Wheaton, 13; Spencer v. Tilden, 5
Coweu, 144; Perkins v. Lyman, 11
Mass. 76 ; Merrill v. Merrill, 15 Id.
488.
But it is equally well settled, that
when the default consists in the non-
performance of an act in pais, which
does not admit of exact compensation,
so that equity cannot place the party
injured by the breach in the position
that he would have held, had the con-
tract been performed, it will refuse to
interfere altogether, and will leave the
parties to get on as they can at law ;
Dunklee v. Adams, 20 Vermont, 415.
And it is peculiarly averse to inter-
fering, where the default has been
wilful, and not the result of inability
or inattention; Baxter v. Lansing,
7 Paige, 350 ; Clarke v. Drake, 3
Chandler, 253 ; Skinner v. Dai/ton, 2
Johns. Ch. 326; Horsburg v. Baker,
1 Peters, 236; The Ottoica Plank
Road Co. v. Murray, 15 Illinois, 336.
Thus it has been repeatedly held in
England, and would seem well settled
in the United States, that equity will
not relieve against a forfeiture incur-
red by the breach of a condition not to
assign in a lease; Gregory v. Wilson,
9 Hare, 683; Green v. Bridges, 4 Sum-
ner, 96 ; Wilson v. Wilson, 14 C. B. 616.
And it was said in Baxter v. Lan-
sing, that a tenant who forfeits his
estate by cutting down timber trees
in violation of his lease, will not be
aided by equity to escape from the
consequences of his own wrong.
In the recent case of Henry v.
Tapper, 3 Williams, 358, the Court
seems to have inclined to the opinion,
that relief will generally be afforded
by chancery, unless the default has
been the result of unwillingness, as dis-
tinguished from mere inability to per-
form ; and set aside a forfeiture, which
had been incurred by a failure to
comply with a condition, to furnish the
grantor with specific articles for his
support and maintenance, and to per-
form a variety of acts for his benefit.
The decision thus made was sustained
by a reference to the case of Ackston
v. Raymond, 9 Vermont, 420, and ad-
mitted to be at variance with the views
expressed in Dunkler v. Adams, 20
Vermont, 451, where relief had been
refused under circumstances nearly
of the same nature. A condition for
the payment of a stipulated price or
value in merchandise, or services for
the maintenance of the grantor or for
any other purpose, may no doubt be
relieved against, because it affords a
measure of value and consequently of
compensation ; but it is difficult to
see on what principle chancery can
interfere when the services are speci-
fic, and there is nothing to show that
they were to be rendered in lieu of
money, or to give the right to substi-
tute money for them.
It has, however, been said, and
would seem to be true, that when
equity cannot relieve against the con-
sequences of a breach of condition,
it will stand neutral, and will not
lend its aid to enforce a forfeiture as
such under any circumstances ; The
Michigan Bank v. Hammond, 1
Douglass, 527; and especially when
incurred by the default of others, and
not of the party against whom it is
sought to be enforced. Livingston v.
Tompkins, 4 Johnson, Ch. 415. And
on the other hand, when a condition
672 PENALTIES. — FORFEITURES. — LIQUIDATED DAMAGES.
partakes of the nature of a trust, and
is designed for the benefit of a third
person, equity may pass beyond the
rule of the common law, which con-
fines the remedy to the grantor and
his heirs, and render it effectual in
behalf of those who are interested in
its fulfilment, not by exacting a pen-
alty for the breach, but by compelling
performance : Leach v. Leach, 4 In-
diana, 628; 1 Smith, Leading Cases,
5 Am. ed.
Provisions are frequently inserted
in bonds and mortgages, advancing
the period for the payment of prin-
cipal, in case of default in the pay-
ment of interest, and were formerly
treated as penalties, for which relief
would be afforded in equity. Thus,
where a bond was conditioned for the
payment of 87000, in two years, with
a proviso, that if the interest were
not paid regularly, the principal
should become due at once, the pro-
viso was held to be a mere penalty,
against which equity would relieve on
the payment of all arrears of interest;
Mayo v. Judah, 5 Munford, 495 ;
Bonafous v. Rybot, 3 Burrow, 1370.
But it was said that if the principal
had been payable immediately, with
a provision for further time, in case
the interest were paid punctually, re-
lief would not have been afforded
against the consequences of a default.
This distinction, however, which was
too thin to stand, has been overruled
in the more recent cases, which de-
cide that such stipulations are not to
be regarded in the light of penalties,
but as component parts of the con-
tract, and are therefore valid, both
under the general principles of equity,
and the more limited remedial provi-
sions of the statute 8 & 9 Wm. 3, c.
11, as administered at law. Jones v.
Thomas, 5 B. & Ad. 40 ; The People
v. The Superior Court of New York,
19 Wend. 104 ; Noyes v. Clark, 7
Paige, 179 ; The Ottawa Plank Road
Company v. Murray, 15 Illinois, 337.
Thus, in the recent case of Baldwin v.
Van Vorst, 2 Stockton, Ch. 577, where
the question arose on a condition for
payment in ten years, but with a pro-
viso, that if the interest were not paid
punctually, the whole debt should be
due and payable at once, the Court
refused to relieve against a forfeiture
incurred by the non-payment of in-
terest, on the ground that the parties
had made time of the essence of the
contract, and that equity could not
interfere without doing violence to the
spirit as well as the letter of their
agreement. Care must, however, be
taken in every such instance, to see
that the consequences of the forfeiture
are limited to the acceleration of the
time of payment, because if the effect
of the stipulation be to render a
greater sum payable in lieu of a less,
the whole will be viewed as a penalty,
and relief given on the payment of
interest, as a compensation for the
delay, in addition to so much of the
principal as would have been due,
had no default happened; and hence
a covenant for the payment of a gross
sum by instalments, cannot, it has
been said, be coupled with a condi-
tion that on default in the payment
of any instalment, the whole shall be
payable at an earlier period than that
fixed in the first instance, because
this would virtually increase the
amount, by the sum which ought to
have been discounted : Tiernan v.
Hinman, 16 Illinois, 400. But it
would seem questionable whether this
PEACHY V. DUKE OF SOMERSET. — SLOMAN V. WALTER. 673
argument can be applicable, unless the
instrument would have been usurious,
had the whole debt been made pay-
able at once, in the first instance ;
for otherwise, the agreement that it
shall be paid by instalments, is for
the benefit of the debtor, and may be
coupled with any condition which the
parties think proper.
The ground on which equity re-
lieves against penalties and forfeitures
seems to be, that the object of enter-
ing into a contract, must be presumed
to be its fulfilment, and not the in-
fliction of an injury on one side, nor
the acquisition of a collateral advan-
tage on the other; and consequently
that when this object is frustrated,
the intention of the parties is best
carried out, by substituting an equi-
valent in its stead, and not by en-
forcing a recovery different in nature,
or excessive in value. It was on this
ground, that equity first interfered in
the case of mortgages, by holding,
that the creditor should recover his
debt with interest, as a compensation
for the delay in its payment, but
should not be allowed to deprive the
debtor of the land, in addition to the
debt, as he might have done under
the course of the common law.
It is, notwithstanding, well settled,
that the parties to a contract are en-
titled to agree upon any amount of
compensation for its breach, which
does not manifestly exceed the amount
of injury suffered; and that this may
be done beforehand, when the con-
tract is made, as well as afterwards,
when it has been broken ; Pierce v.
Fuller, 8 Mass. 223; Bayley v. Ped-
dle, 16 New York R. 469. Hence,
when it is agreed, that if the con-
tract bo violated, the party in de-
vol. in. — 43
fault shall pay the other a fixed sum
as an equivalent for his loss, the
agreement will be binding, and the
stipulated payment enforced, unless
it manifestly exceeds the amount of
injury inflicted by the violation ; Mott
v. Mott, 11 Barbour, 127; Lowe v.
Peers, 4 Burrow, 225; White v. Ding-
ley, 4 Mass. 433 ; Tingley v. Cutler,
7 Conn. 291 ; Myers v. Hays, 7 Mis-
souri, 98 ; Slosson v. Beadle, 7 John-
son, 72; Pierce v. Fuller, 8 Mass.
223 ; Gammon v. Howe, 14 Maine,
250; Dakin v. Williams, 17 Wend.
447; 22 Id. 201; Knapp v. Maltby,
13 Id. 587 ; Durst v. Swift, 11 Texas,
274 ; Low v. Nulte, 16 Illinois, 478 ;
Hampton v. Overton, 6 Blackford,
206. It has accordingly been held
that damages may be liquidated be-
forehand by agreement, for ploughing
up a field, in contravention of the
lease under which it is held, (Astley
v. Weldon, 2 B. & P. 346 ;) for refus-
ing to comply with a promise of mar-
riage, (Peers v. Lowe, 4 Burrow ;) for
a delay in doing or furnishing work
or materials, (Fletcher v. Dyke, 2
Term, 32; Curtis v. Brewer, 17 Pick.
513 ; Faunce v. Burke, 4 Harris,
469 ;) for the failure of a chemical
process or receipt to serve the end,
which it had been alleged competent
to attain, (Brewster v. Edgerly, 13
New Hampshire, 275;) for the breach
of a covenant to build a house upon
land which had been bought by the
covenantor from the covenantee,
(Pearson v. Williams, 24 Wend.
246 ; 26 Id. 630 ;) for a failure on
the part of a vendee to comply with
the terms of a contract of sale by ac-
cepting a deed, and paying the pur-
chase-money, ( Gammon v. House, 14
Maine, 250 ; Williams v. Green, 14
674 PENALTIES. — FORFEITURES. — LIQUIDATED DAMAGES.
Arkansas, 315 ; Mundy v. Culver, 18
Barbour, 336 ; Holmes v. Holmes, 12
Id. 137; Reilly v. Jones, 1 Bing.
302 5) or on that of the vendor by a
refusal to execute a deed, {Durst v.
Swift, 11 Texas, 274; Chamberlain
v. Baffle?/, 11 New Hampshire, 234;)
or for non-compliance with a covenant
not to practise a trade or profession
within certain limits, ( Green v. Price,
13 M. & W. 695; Atkins v. Kinnier,
4 Exchequer, 776.) Thus in Green v.
Price, a defendant who had covenant-
ed not to carry on the business of a
hair-dresser and perfumer, within six-
ty miles of London, and bound himself
in the sum of £5000, for the faithful
observance of his covenant, was held
liable for the whole amount upon
breach, without regard to the actual
injury which the breach had occa-
sioned. This decision was affirmed
on error by the Exchequer Chamber,
and followed in the subsequent cases
of liawlinson v. Clarke, 14 M. & W.
187, and Galsworthy v. Strutt, 1 Ex-
chequer, 659 ; and would seem to be
well settled law, both in England and
this country : Miller v. Elliott, 1 Car-
ter, 404.
The reason of this mode of con-
tract, has a strong affinity to that,
which prevails in the case of valued
policies of insurance. In neither
case are the parties allowed to aim at
anything more than an indemnity,
but in both they may adopt a fixed
standard, for the admeasurement of
that which is uncertain in itself, and
unsusceptible of being reduced to cer-
tainty by legal computation ; 2 Ameri-
can Leading Cases, 588, 4th ed. Thus
in Green v. Price, and Galsworthy
v. Strutt, the object was to secure a
fixed measure for the damages, which
might be sustained, in consequence
of the wrongful act of the defendant,
in violating his contract, and pursuing
the business, which he had transfer-
red to the plaintiff, within the limits
exclusively appropriated to the latter.
These damages might be unsusceptible
of exact proof or compensation, and
it was, therefore, impossible for the
court to deny the parties the right
of fixing the amount, or to decide
that the amount thus fixed ex-
ceeded the reality. Dakin v. Wil-
liams, 17 Wend. 447; 22 Id. 201.
In like manner, a covenant in a
contract of sale, to erect two houses
by a day certain, on the land pur-
chased from the covenantee, or in de-
fault thereof, pay §4000, was to be
held to be binding for the whole sum
named in the covenant, irrespectively
of the question, whether it did or did
not exceed the injury inflicted by the
breach, because the damages were in
their nature uncertain, and therefore
a fit subject for liquidation; Parson
v. Williams, 24 Wend. 24(1; 26 Id.
630 ; while the case of Hosmer v.
True, 19 Barb. 106, went still further,
by deciding that an agreement, that
one of the parties should meet the
other, for the purpose of settling an
open account, or pay SI 000 in case of
default, was upheld by a sufficient
consideration, and ought to be speci-
fically enforced by the law. But
when the amount stipulated to be
paid, in case of a violation of the
contract, manifestly exceeds any in-
jury which can be inflicted by the
breach, it will be regarded as a pen-
alty, and not as a compensation, Watts
v. Sheppard, 2 Alabama, 425; Hughes
v. Wister, Walker, 516 ; Bugh v. Reno-
land, 5 Howard, Miss. 398. Thus
PEACHY V. DUKE OF SOMERSET. — SLOMAN V. WALTER. 675
it was said in Astley v. Weldon, 2 Bos.
& Pul. 346, that when a greater sum
is stipulated to be paid, in case of the
nou-payment of a less, it must be
looked upon in the light of a penalty
and the rule thus laid down is fully sus
tained by the whole course of decision
Dakln v. Williams, 17 Wend. 447
22 Id. 201; Bagley v. Peddle, 2
Smith, Court of Appeals B. 469
Spear v. Smith, 1 Dcnio, 465; Tier
nan v. Illnman, 16 Illinois, 400
which establishes that no amount of
injury, which can arise from the non-
payment of money at a stipulated
period, can justify the adoption of a
higher standard of damages than the
legal rate of interest, and that every
attempt to transcend these limits, and
give a larger compensation by agree-
ment, will be disregarded by the law,
or set aside by equity ; Orr v. Church-
hill, 1 Henry Blackstone, 227; Wil-
liams v. Green, 14 Arkansas, 315.
Whenever, therefore, the damages
resulting from a breach of agreement,
arc susceptible of being estimated by
calculation, they cannot be liquidated
by the parties themselves, who must
be content to abide by the rate of com-
pensation established by law. Thus
it was held in Spear v. Smith, 1
Deuio, 465, that an agreement to pay
1100 in the event of the non-perform-
ance of an award, must be regarded
as a penalty, because the award might
have been, and actually was for the
payment of a sum of money, and the
damages were consequently to be com-
puted by the calculation of interest,
and adding it to the principal. The
same view was taken in Gray v. Cros-
ly, 18 Johnson, 219, 226, and Hoag
v. M'Glnnls, 22 Wend. 163. And
the better opinion would seem to be,
that a stipulation for the liquidation
of damages will be void not only
when it actually imposes an obligation
for the payment of a larger sum as a
compensation for the non-paymeut of
a less, but whenever that result might
have been produced by, or followed
from it, because that which would
necessarily have been construed as a
penalty, in one event, must be sup-
posed to have been intended as such
in all; Nioer v. Rossman, 18 Barb.
50 ; Curry v. Larer, 7 Barr, 470 ;
Shlel v. M'Nitt, 9 Paige, 101. No
general or uniform rate of compensa-
tion can therefore be established for
the violation of an agreement which
contains a stipulation for the payment
of money, conjoined with others for
the performance of acts in pals, un-
less care is taken to discriminate be-
tween them, and to show that the
intention was to liquidate the damages
for those breaches only, which are un-
certain in their own nature, and which
cannot be reduced to certainty with-
out the aid of extrinsic evidence, and
the submission of the question to the
decision of a jury, to the exclusion of
those which may be made the subject
of a pecuniary calculation ; Niver v.
Rossman; Thoroughgood v. Walker,
2 Jones, (N. C.) B. 15. The result
will be the same, when a stipulation
for the liquidation of damages is so
worded as to be applicable to two dif-
ferent parties, one of whom has bouud
himself to the payment of a specific
sum of money, while the other has
not, because it would be obviously un-
just to discriminate between them,
and hold the latter to the strict letter
of his engagement, while adopting a
milder interpretation with respect to
the former; Ilaldcman v. Jennings,
076 PENALTIES. — FORFEITURES. — LIQUIDATED DAMAGES.
14 Arkansas, 329. And hence, a
stipulation for the payment of a sum
certain, in case either of the parties
to a contract of sale, fail to comply
with his part of the bargain, will be
void as to both, unless it can be con-
strued as applying solely to an eutire
breach or rescission of the contract,
and not to a delay in the payment of
the price, which, like other defaults
of the same nature, is susceptible of
compensation by interest; Thorough-
good v. Walker.
It is well settled, in accordance
with these principles, that while a
vendor may bind himself to the pay-
ment of a fixed sum, in the event of
a failure to execute a conveyance at
the time stipulated in the contract of
sale, because the default may involve
consequences which the law cannot
estimate with certainty, and which
may therefore be made the subject of
a special computation; Chamberlain
v. Bagley, 11 New Hampshire, 23 \ \
the measure of damages for a default
or delay in the payment of the pur-
chase-money, by the vendee, must be
sought in the computation of interest,
as in other cases where pecuniary ob-
ligations are in question; Lampman
v. Cochran, 2 Smith, Court of Ap-
peal R. 275. But this latter pro-
position only holds good when the
vendor tenders a conveyance, and
brings suit for the recovery of the
purchase-money, and has no applica-
Cation to those defaults which put an
end to the contract, and with it to the
obligation of the vendor to convey,
because the injury then depends on
the diiference between the value of
the land, and the price agreed to be
paid for it by the vendee, which can-
not be ascertained by calculation, and
may consequently be liquidated by
agreement ; Tingley v. Cutler, 7 Conn.
291 ; Gammon v. Howe, 14 Maine,
250; Williams v. Green, 14 Arkan-
sas, 315; ReiUy v. Jones, 1 Bing.
302. But it is equally plain, that
the sum agreed to be paid by the ven-
dee, for a failure or refusal to accept
a conveyance, must not exceed the
price of the land, because that would
be virtually to stipulate for the pay-
ment of a greater sum in lieu of a
less, and to violate the rule, that the
compensation shall not go farther
than the utmost possible limits of the
loss; Haldeman v. Jennings, 14 Ar-
kansas, 329 j Williams v. Green, Ih.
315, 320. And the true import and
meaning of the distinction on which
this class of cases depends, are strik-
ingly Bhown by the fact, that while
the failure of the vendor to pay off
encumbrances cannot be made the
subject of a stipulation, varying the
rule fixed by the law, for the compu-
tation of damages, when money is in
question, the damages resulting from
the breach of a contract to procure a
release of an outstanding title, to the
whole or part of the land conveyed,
may be fixed at any rate on which the
parties see fit to agree; Westerman v.
M'<tn*, 2 Jones, Penna. R. 07.
We have seen that an agreement
for the liquidation of damages, which
is manifestly in excess, or can be
shown to be so by calculation, will
be void ; and there are a number of
cases which sustain the idea, that the
same result will follow, when the ex-
istence of the excess can be establish-
ed by evidence, although not appear-
ing on, or deducible from, the face of
the contract ; Curry v. Larer, 7 Barr,
47<» : Spencer v. Tilden, 5 Cowen,
PEACHY V. DUKE OF SOMERSET. — SLOMAN V. WALTER. 677
144 ; Berry v. Wisdon, 3 Ohio, N. S.
241 ; while there are others which
seem to confine the right of liquida-
tion to those instances where the want
of sufficient means of information, or
other circumstances, would render an
estimation of the injury, by a chan-
cellor or jury, difficult or impossible.
Thus it was said in Perkins v. Lyman,
11 Mass. 7G ; Hodges v. King, 7 Met-
calf, 583 ; and Watts v. Sheppard, 2
Alabama, 425, 441 ; that the court
might look to the facts and circum-