Court Opinion

ID: 6720919
Source: CourtListenerOpinion
Date Created: 2022-07-20 22:53:57.140267+00
Date Added: 2024-06-11T16:01:34.035521
License: Public Domain

ROBINSON, J.
1. In determining whether the sum provided in a contract to be paid in the event of its breach is liquidated damages, or a penalty, a court will construe the contract by its four corners in the light of the situation of the parties at the. time of the execution of the contract, and from that position will determine whether the damages which would be sustained by reason of the breach could, at the time of the execution of the contract, by the process of computation and adjustment, have been easily and approximately ascertained; and, in determining whether they were so ascertained, will compare the amount stipulated with the amount of damages which would probably result from the breach, and if there is such discrepancy between the sum stipulated and the damages which would probably and naturally result from the breach- as to indicate that the sum stipulated could not have been arrived at by a process of computation and adjustment, or if arrived at by process of computation and adjustment such process did not have for its purpose compensation, but was arrived at for some purpose other than compensation, the sum stipulated will be held to be penalty rather than liquidated damages.
2. Where the parties to the contract, having in mind the damage which will be occasioned by its breach, compute or estimate that damage and contract with reference thereto, and the sum stipulated bears a reasonable proportion to the damage, such stipulated sum will be considered as liquidated damages,
3. Where the damage which Would result from a breach would be difficult of ascertain*181ment in advance, or difficult of proof after the breach, and the parties to the contract, for the purpose of fixing the compensation which would be due the party complying from the party in default, stipulate the amount, and the sum is not unreasonable or unconscionable, the stipulated sum will be construed as liquidated damages.
4. Where a contract contains several covenants, and the stipulated forfeiture is applicable alike to each covenant, and would become due on the breach of a single covenant, and is clearly a penalty as to any one covenant, it will be held a penalty as to all' covenants.
Judgment affirmed.
Marshall, C. J., Day and Allen, JJ., concur.