Court Opinion

ID: 9553867
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:36:22.353495+00
Date Added: 2024-06-11T15:32:27.659359
License: Public Domain

Williams, J.
(dissenting) — The Supreme Court, construing an identical clause in Underwood v. Sterner, 63 Wn.2d 360, 366, 387 P.2d 366 (1963), stated:
the policy of the courts of this state is to uphold provisions for liquidated damages, unless it is shown that they are, in effect, a penalty.
The test of whether the amount to be forfeited in the event of a breach is liquidated damages or a penalty is to be made with reference to the party against whom the damages are assessed. In this case, if the amount to be forfeited in the event of a breach by the buyer is exorbitant, it is a penalty and unlawful; if the amount to be forfeited by the buyer is relatively small, however, it is not a penalty and it is lawful for the parties so to agree. The following rules apply:
If a provision is held to be a genuine liquidation of damages and not for a penalty or forfeiture, it is enforceable according to its terms like any other valid contract promise or provision. It makes definite and certain the amount to be paid or retained. The injured party can get judgment for the specific amount promised, no more and no less. The function of the court and jury in estimating injury has been superseded. Evidence as to the existence and extent of injury may be admissible to aid the court in determining the character of the contract provision; but it is no longer relevant after the court has *824determined that the provision is a true liquidation and does not specify a penalty.
5 A. Corbin, Contracts § 1061 (1964).
Public policy may forbid the enforcement of penalties against a defendant; but it does not forbid the enforcement of a limitation in his favor.
5 A. Corbin, Contracts § 1068, at 386 (1964).
In other words, the contracting parties may limit the amount of damages for breach of contract, but they may not legally agree to the forfeiture of an amount so unreasonably large that it is, in fact, a penalty. The amount of damages which Mrs. Mahoney was entitled to recover is therefore fixed at $200.
I would affirm.
Petition for rehearing denied June 12, 1974.
Appealed to Supreme Court June 17, 1974.