Case: THE PHOENIX IRON COMPANY v. THE UNITED STATES
Abbreviation: Phoenix Iron Co. v. United States
Decision Date: 1904-11-07
Docket Number: No. 22784
Citation: 39 Ct. Cl. 526
Volume: 39
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: THE PHOENIX IRON COMPANY v. THE UNITED STATES.
Judges: 
Pages: 526–542

Head Matter:
THE PHOENIX IRON COMPANY v. THE UNITED STATES.
[No. 22784.
Decided November 7, 1904.]
On the Proofs.
The contract is for the steel framework of the Government Printing Office in Washington. It provides, and the specifications set forth, that “ time is an essential feature of the contract; ” “ that the contractor will he required, to pay $100 per day for each day of delay in the completion of the contract as liquidated damages and not hy loay of penalty; ” “that the amount of liquidated damages is determined by actual current expenditures for rents which are made necessary by the lack of a new building; ” “that no liquidated damages in excess of $20,000 will he deducted.” Work is delayed beyond the contract period by the fault of the claimant for a period of 52 days.
I. While courts are disposed to construe contracts as open to the question of real or actual damages, they do not hesitate to enforce the agreement when from its terms and the subject-matter of the litigation it appears that the parties have agreed to a stated amount as , a settlement of the real or actual damages.
II. A court must first consider the form in which the parties have expressed their jrarpose, and determine from the language used, in the light of the circumstances and the nature and character of the subject-matter, whether such a provision should be treated as that of penalty or liquidated damages.
III. In this case the subject-matter of the contract belongs to that class which is not easily susceptible of proof of actual damages, and the language of the contract and specifications clearly indicates that the provision was intended for liquidated damages and that it is:reasonable and proper to be enforced as such. The cases ’relating to penalty and liquidated damages reviewed.
The Reporter's statement of the 'case:
The following are the facts of. the case as found by tbe court:
I. The claimant is a corporation, incorporated under the laws of the State of Pennsylvania,': having its principal place of business in the city of Philadelphia. For many years it has been engaged in the manufacture of structural steel work and the erection of the framework' of large buildings.
■II. On March 26, 1900, representatives of the claimant and of the United States executed a contract for the manufacture ■ and erection of the steel framework of the Government Printing Office, in Washington, D. C., a copy of which contract with the specifications annexed thereto is made part of the petition herein as Exhibit A. It was approved by the Chief of Engineers, United States Army, on April 11, 1900, and the claimant was notified of its approval on the following day.
The contract was to have been completed within six months after the approval of same.
The time for the completion of the work under the contract was extended to January 16, 1901.
Claimant completed the work under the contract June 23, 1901, except the painting on the power house, which had been deferred by directions of the defendants and was completed by defendants July 31, 1901.
Specifications, giving a general description of the work contemplated, were published prior to the execution of tlie contract.
III. The United States was required to furnish to claimants all drawings necessary to a. clear understanding of the work and its structural details, and claimants were required to follow strictly the dimensions and details shown in said drawings. Claimants were also required to make their own shop drawings and to furnish the engineer copies for comparison before going ahead with the work covered by the drawings.
Such detailed drawings were furnished by the United States at various times, the first being furnished on May 3, 1900, and the last of said drawings being furnished May 15, 1901.
Shop drawings of the various kinds of structural steel required were prepared by the claimants and submitted to the United States for approval. In most instances they were approved promptly, but in other instances the approval was delajred, or changes affecting the dimensions or shapes of the materials were required. When approved and returned to the claimants all drawings were forwarded promptly to its shops.
Such preliminary plans and drawings do not supply all of the information required for the manufacture of structural steel, and it was necessary for the claimants to have them in order to know what structural steel would be required for the building and in order that the various parts of the steel work might be designed, shop drawings prepared showing the dimensions and all details of each type of material, and mill orders made out for the information and guidance of the shops where the steel work is to be prepared. ■
Prior to receipt of the preliminary plans and drawings the claimant had no means of knowing what structural steel would be required for the building.
IV. 1. The claimant was required to and did make, from time to time between the latter part of August, 1900, and the early part of November, 1900, certain changes in the design of materials for the said work, and in the order of performance thereof, which delayed the completion of the work.
2. When tlie steel work for tlie Gr street extension began to arrive it was found to be defective in the fit of important members. These defects and the time consumed in correcting them caused a delay of thirty days, including Sundays and holidays, on the part of the claimant in the completion of the Gr street extension so far as the steel work was concerned.
3. During the fall of 1900 the contractors for the brickwork had on hand, ready to lay, bricks for about one month’s work, but the steel frame was not sufficiently far advanced to permit the doing of this work. .• This delayed the ultimate completion of the building. The total delay caused by claimant amounted to fifty-two days, exclusive of Sundays .and holidays.
4. By the end of September, 1900, claimant had procured and delivered all of the materials needed for the G street extension and power house and was prepared to proceed with the erection of the building with the utmost dispatch. The United States about that time ordered a change in the order of performing the work, requiring the claimant to postpone the erection of the power house indefinitely, and to proceed with the erection of the main building and the G street extension simultaneously.
The materials for the main building were not ready when this change was ordered, the work on same having been deferred in order that the materials for the G street extension and power house might be finished at the earliest practicable date. The claimant had been.delayed by the failure of the United States to furnish preliminary plans and drawings for the main building, the last' drawings for which were not received until April 2 and 3, 1901.
The foundations for the power house and the “ driveway ” were not completed by the United States when same were needed for the steel framework, the foundation for the former not having been completed until May 10, 1901, which prevented the commencement of the erection of the steel framework thereof until after that date. The building on the site of the power house was not vacated until after the .adjournment of Congress, March 4,‘ 1901.
By April 1, 1901, the claimant was dependent upon the work adjacent to the new power plant to keep their forces employed; and had the old office been vacated, as originally intended, the entire frame would have been practically completed by April 1, 1901.
Y. The inspection of the contract work of claimant by the agents of the United States in charge of it was not unduly exacting and did not exceed the requirements of the contract and specifications.
VI. Contrary to the custom or trade usage followed in the erection of large buildings, the claimant was forbidden by the United States to deliver and store the steel work to be used in the construction of the Government Printing Office on or about the site of the work. This occasioned some delay to the claimant.
VII. Certain persons engaged in constructing the brickwork of the building under contracts with the United States, independent of the contract in suit, failed to complete their work in due time. It does not appear that these delays had any bearing on the ultimate completion of claimant’s work on the entire building.
VIII. By reason of the facts referred to in -the second paragraph of finding iv, the claimant delayed the completion of the steel work on the G street extension twenty-six days, and on account of the facts mentioned in the third paragraph of finding iv the ultimate completion of the building was delayed by claimant twenty-six days, making a total of fifty-two days, exclusive of Sundays and holidays, caused by the claimant.
By reason of the failure of the defendants to provide the claimant in due time with general plans and drawings; by the failure of the defendants to complete the foundations of the power house and other parts of the building in time to permit of the erection of the steel framework to proceed in due course; on account of the changes in design and in the order of performing the work which were required and ordered by the defendants, and on account of the claimant being prohibited from delivering and storing the steel work to be used in the construction of the building on or about the site of the work, all other delays in the completion of the work under the contract were caused by and are chargeable to the defendants.
IX. From time to time, as the said work progressed, the United States paid the claimant certain sums as partial payments under the contract. On June 23, 1901, these partial payments amounted in the aggregate to $20,000 less than the total contract price. The said sum of $20,000 had been withheld by the United States pending the completion of the contract by the claimant. On or about November 9, 1901, the United States offered to pay the claimant $4,929.18 as a settlement in full for the balance'.due under the contract, claiming that liquidated damages, actual damages, and sundry items to the amount of $15,070.22 should be deducted from or offset against the said balance of $20,000. The claimant refused to accept the said offer, demanding from the United States payment of the,'said sum of $20,000, but the United States failed to pay tli'e same, and the same has has not been paid nor any part thereof. By agreement of the parties the United States paid for certain items of work which the contract required the claimant to perform, to wit:
2315 days’ painters’ labor, at if2 per day__$462. 75
Amount x>aicl for 0 wire brushes (see voucher No. 87, July, 1001)--- 1.80
Amount paid for 18 Garland paint brushes (see voucher No. 95, July, 1001)-'- 9.00
: 473.55
The sum of these items, $473.55," should be credited to the United States. .
Mr. James H. Hayden for the claimant. Messrs. McCam-mon (& Hayden were on the brief:
There have been many cases founded upon contracts similar to the one in suit where this court has been called upon to determine whether the contractors’ delays in the completion of their work, caused by their fault, rendered them liable for liquidated damages, or for penalty, in sums equal to the damage sustained by United States. .-.Few of the contracts considered in these cases have contained the same provision with respect to delays, because, as decisions of the court have been rendered holding that' only the hctual damage could be charged to the contractor, various departments of the Government have endeavored to draw their contracts in such a way as to escape from previous decisions, to the end that the contractors might be mulcted in liquidated damages.
One of the leading cases on this subject is that of Van Burén v. Digges (11 Plow., 461). See also Davis v. United States (17 C. Cls. K., 201) ; Haliday v. United States (33 C. Cls. B>., 453, 465). In this case it was held that no deduction could be made, except upon proof that the United States had sustained actual damage, and that a deduction made at the rate of $25 per day, as liquidated damages, agreed upon by the parties was improper. See also L. P. & J. A. Smith Go. v. United States (34 C. Cls. R., 472), Edgar d¡ Thompson Foundry and Machine Works v. United States (34 C. Cls. K.., 205). In the last case the court commented upon the conflict of the terms employed in this section, one. speaking of the deduction to be made as a forfeiture, and the other as liquidated damages. The rule laid down in the case of Van Burén v. Digges (supra) was noticed and the court said (p. 22) :
’ “ Taking into consideration the doubtful and contradictory language of the agreement in connection with the unreasonable result as to damages in applying the theory that the agreement is to be construed as fixing a compensation, it is the opinion of the court that the deduction mentioned in the contract must be regarded in the nature of a penalty, and as no damages are shown, claimants are entitled to recover.”
Mr. John Q. Thompson (with whom was Mr. Assistant Attorney-General Pradt) for the defendant:
In support of claimant’s contention counsel cite the well-known and leading case Van Burén v. Digges (11 How., p. 461).
Without entering upon any lengthy discussion as to the difference between the term “ forfeiture ” or “ penalty ” and “ liquidated damages,” we desire to draw the distinction between the case cited by claimant and the case at bar, as provided in the terms of the contract. It has been seen in clause 36 of the specifications that “ the said payment to be made as liquidated damages and not by way of penalty.” And again, clause 39 of the specifications, “ the amount of liquidated damages is determined by actual current expendi tures for rent, which are made necessary by the lack of the new building, and Avhicli will cease upon its completion.”
And in the contract itself, section'5, it is provided * * * “ which said sum of $100 per day is hereby agreed upon, fixed, and determined by the parties hereto as the damages which the said United States will, suffer by such delay and default and not by way of penalty.”
Here it is expressly provided in the contract and in the specifications accompanying the contract that the payment to be made to the United States by claimant in case of failure to complete the work within the time specified • shall be liquidated damages, based upon a clear and distinct understanding and agreement between the parties to the contract as to what reasonable damages would be for failure to complete the contract within the time specified, and is expressly stated that the payment is not to be considered as a forfeiture or penalty. In the case cited by claimant, Van Burén v. Digges, it was expressly provided in the contract that the defendant Digges was to forfeit 10 per cent, etc., on the whole amount, if the contract was not completed at the time agreed upon, and the court in rendering the opinion expressly calls attention and bases its judgment upon the fact that the contract used the word forfeit.
The Van Burén- v. Digges case has been cited in numerous briefs and opinions on the question of forfeiture or penalty and liquidated damages, but we fail to find where the courts have departed from the doctrine there announced, to wit, that when the contract provides in terms for a forfeiture or penalty, then the party seeking to obtain relief must show actual damages, but it does not follow .that where a contract provides for “ liquidated damages ” and in the absence of fraud and the contracting parties capable of entering into a contract, each having the facilities for information equal with the other, that such agreement for liquidated damages will not be sustained by the courts.
Further, following the case cited by claimant in his brief, to wit, Davis v. The United States (7 C. Cls. B., 201), the contract provided for the transportation of army supplies by steamboat, and contained the stipulation, “ twice the cost price of the supplies, deficient, together with the actual cost of transportation of same from the place of purchase to the point where they were turned over-” to him for transportation, that the term “ twice the cost ” should be taken as a penalty, and not as liquidated damages.
Here it will be seen that the court regarded the provision in the contract as in the nature of a penalty simply because of the exorbitant and excessive damages provided by the terms of the contract.
In the case of Holliday v. The United States (33 C. Cls. R.), cited by claimant, the contract provided in terms for the forfeiture of $25 per day, and the learned judge in delivering the opinion of the court quotes from the Kennedy case (24 C. Cls. R., p. 142), which, in turn, relies upon the Van Burén v. Digges ease, as to the term “ forfeiture ” being-used in the contract.
• In Smith Company v. The United States (34 C. Cls. R., 472), cited by claimant in support of his contention, the contract provided “ and the said party of the first part further agrees to forfeit,” etc. Here, again, the term “ forfeit ” is used instead of the language “ liquidated damages.” And the opinion- in the Smith case is largely based upon the Van Burén v. Digges case, by reason of the similarity in the language of the contract, the court holding in the Smith case that from the language of the contract the parties intended the forfeiture of $20 a day as a penalty for the faikire to perform the contract.
In the Edgar Thompson Foundry and Machine Works v. The United States (34 C. Cls. R., p. 205), cited by claimant, a similar provision is found in the contract, being as follows:
“ And the said party of the first part further agrees to forfeit the sum of $25,” etc.
Where the term “ liquidated damages ” is used in contracts, and the courts have held the words not to be conclusive, other circumstances entering into the contract and •concerning the particular case clearly indicated that the words were not reliable. Sedgwick on Damages, section 390, says:
“ But if, on the other hand, the contract is such that the strict construction of the phraseology would work absurdity or oppression, the use of the term ‘ liquidated damages ’ will not prevent the courts from inquiring into the actual injury sustained and doing justice between the parties.”
But it has been held as follows:
“ But the court will not apply this principle and disregard the express stipulation of parties, only in those cases where it is obvious from the contract before them and the whole subject-matter that the.principle of compensation has been disregarded and that to carry out the express stipulation of the parties would violate this principle, which alone the court recognizes as the law of the contract.” (S&Qjaquith v. Hudson, 5 Mich., p. 134.)
In other words, as is stated in the argument in the case of Edgar and Thompson Works v. The United States (34 C.. Cls. It.), the court should not go out of its way to make for the j)arties a wiser bargain than they have made for themselves. Consequently the words should be given their due weight in construing this contract, as the defendant claims there is an absence of circumstances contradictory to their natural import. Further—
“ If the intention, however, is clear to liquidate damages and the amount is either not greatly above or below the sum which would otherwise be recoverable; or, if above, was fixed specially to cover contemplated consequential losses not provable under legal rules and is not an unreasonable provision therefor, the sum fixed may be sustained as liquidated damages.” (See Sutherland on Damages, vol. 1, p. 154.)
It must be remembered that in this case we are not seeking to have a forfeiture or penalty declared to be in the nature of liquidated damages, for the contract itself specifically provides, in unmistakable terms, that for the failure to complete the structural work by the time provided in the contract the defendant may retain the sum of $100 per day for each day over the time when the building was to be completed by the terms of the contract, and the retention of said sum of $100 per day is, by agreement -between the parties, fixed as the reasonable liquidated damages accruing by reason of the nonperformance of the contract by the claimant. Without citing specifically the cases sustaining the defendants’ contention in this case, we refer the court to the Third Comptroller’s Decisions, pages 286-287, inclusive, wherein there is collated a large list of cases upholding and sustaining the position taken by defendant on this branch of the case.
In the case of the Sun Printing and Publishing Company v. Moore (183 U. S., pp. 642-674) the charter party provided for the hiring of a yacht, and in case the same should be lost the sum of $75,000 was to be paid the owner, said sum being agreed upon between the parties to be the actual value of the yacht. The vessel was wrecked and became a total loss. The court held that the stipulated payment was a measure of damages and gave judgment for $65,000, the stipulated sum, less the amount of the hire received by the claimant, to wit, $10,000, up to the time of the loss of the boat. The opinion is to the effect that the parties are to be rigidly held to the terms of their contract where they have had equal facilities for information and in the absence of fraud or other very strong.grounds for holding otherwise.

Opinion:
WeldoN, J.,
delivered the opinion of the court:
The claimant is a corporation created under the laws of the State of Pennsylvania, and on the 26th of March, 1900, made a contract with the defendants for the steel framework for the new Government Printing Office in the city of Washington, which contract and specifications are made a part of the petition as Exhibit A.
By the terms of the contract the United States was required to furnish claimant with necessary drawings. The claimant was required to make its own shop drawings, and to furnish the engineer of the defendants with copies for comparison. Such detailed drawings were furnished by the United States at various times, the first on May 3, 1900, and the last on May 15,1901.
, By the terms of the contract the defendants were to pay certain specific prices for the different kinds and quality of material used in the construction of the building, and the material furnished and work done was subject to a rigid inspection by the engineer of the defendants and his decision as to quality and quantity was to be final. The work was to be commenced within sixty days after the notification of the approval of the contract and completed within six months from that time.
The contract was not completed within the time, which ended on the 16th day of January, 1901, the time having been extended, but was delayed in its completion until about the 23d day of June, A. D. 1901.
It is expressly provided by the-terms of the agreement " that time shall be considered as an essential feature of this contract, and that in case of failure upon the part of the party of the second part to complete this contract, as specified and agreed upon, that the party of the second part shall and will pay to the United States the sum of one hundred dollars ($100) for each and every day the said party of the second part shall delay in the completion of this contract, which said sum of one hundred dollars ($100) per day is hereby agreed upon, fixed, and determined by the parties hereto as 'the damages which the- said United States will suffer by such delay and default, and not by way of penalty."
From time to time as the work progressed the defendants paid the claimant partial payments, and on June 23, 1901, the said payments amounted to $20,000 less than the contract price of the work which had been performed by claimant, and on about November 9, 1901, the defendants offered to pay the claimant the sum of $4,927.78 as a settlement in full for the balance due on the contract, claiming that liquidated damages and sundry sums to the amount of $15,070.22 should be deducted from the said $20,000 due on the contract. Included in said sum of $15,070.22 is an item of $473.55 about which there is.no controversy, the claimant conceding that such an a,mount should be allowed the defendants for work which should have been done by claimant.
. The controversy turns upon the question as to whether the delay in the performance of the work was due to the failure of the claimant, to the defendants, or to both.
The contract provides in substance that for any delay caused by the claimant it shall pay to the defendants the sum of $100 per day; the time is made an essential feature of the contract ^ that said sum of $100 is agreed upon, fixed, and determined by the parties as the damage the United States will snflier by such delay and default, and not as a penalty. In the preparation of this contract there seems to have been a special effort made to impress upon the failure of the claimant the consequences of measured liquidated damages and not the mere limitation of damages in the form of a penalty.
It is provided in section 36 of the specifications :
" It must be clearly understood that time is an essential feature of the contract herein contemplated, and that upon failure to complete the said contract within the time stipulated the contractor will be required to pay to the United States one hundred dollars per day for each day of delay (Sundays and legal holidays excepted) in the completion of the contract, the said payment to be made as liquidated damages, and not by way of penalty; and the party of the first part may deduct from any sum due or to become due the contractor any sums accruing for liquidated damages as herein stated."
It is also provided—
" Sec. 39. That.the amount of liquidated damages is determined by actual current expenditures for rent, which are made necessary by the lack of the new building and which will cease upon its completion. But no liquidated damages in' excess of $20,000 will be deducted."
The courts are disposed to treat the sum named as a penalty, rather than the express agreement of the parties, as a settlement of the damages to which the party in fault is to be subjected to as a consequence of his failure. This tendency of the decisions is in order that the parties' rights may be determined on the basis of actual damages rather than upon any arbitrary rule of forfeiture.
While courts are disposed to construe contracts of the kind in controversy as open to the question of real or actual damages, they do not hesitate to enforce the agreement when from the terms of the contract and the subject-matter of the litigation it is shown that the parties have agreed to the amount as a settlement of the real or actual damage.
" If the intention, however, is clear to liquidate damages and the amount is either not greatly above or below the sum which would otherwise be recoverable; or, if above, was fixed specifically to cover contemplated consequential losses not provable under legal rules, and is not an unreasonable provision therefor, the sum fixed may be sustained as liquidated damages." (Sutherland on Damages, vol. 1, p, 504.)
Many cases, some of which will be hereafter noted, have been decided in this court involving the question as to whether the stipulation of the parties on the subject of damages was to be treated as a mere penalty or liquidated damages, precluding an inquiry into the question as to how much the party had suffered by the delinquency or default of the other party. One of the last and leading cases upon the subject of the stipulation of parties of-the sum to be paid for nonperformance of a covenant is the case of the Sun Printing and Publishing Association v. Moore (183 U. S., 643). As stated in the syllabi, it is said:
" The naming of a stipulated sum to be paid for the nonperformance of a covenant is conclusive upon the parties in the absence of fraud or mutual mistake.
" Parties may, in a case where the damages are of an uncertain nature, estimate and agree upon the measure of damages which may be sustained from a breach of the agreement.
" The law does not limit an owner of property from affixing his own estimate of its value upon a sale thereof."
It is true that in the above case it was not a question of penalty or liquidated damages, but the transaction is akin to a stipulation as to the damages in case of the nonperformance of an agreement within a specified time.
Where the parties have agreed upon an amount of damages by way of adjustment and have so expressed it the amount fixed will be treated as damages and not as penalty. (Gammon v. Howe, 14 Me., 250.)
In the case of Dakin v. Williams (17 Wend., 447) Chief Justice Nelson said:
" From a critical examination of all these cases, and" others that might be referred to, it will be found that the business of the court, in construing this clause of the agreement, as in respect to every other part thereof, is to inquire after the meaning and intent of the parties; and when that is clearly ascertained from the terms and language used it must be carried into effect. A court of law possesses no dispensing-powers; it can not inquire whether the parties have acted wisely or harshly in respect to any stipulation they may have thought proper to introduce into their agreements. If they are competent to contract within the prudential rules the law has fixed as to parties, and there has been no fraud, circumvention, or illegality in the case, the court is bound to enforce the agreement."
In the case of Hall v. Crowley (87 Mass., 314) the court, in substance, said:
" The sum named is for.doing one certain and specific job of work within a prescribed time, and not for the omission to comply with diverse and separate stipulations; that the loss or injury which Avould accrue to the owner for the noncom-pletion of the house according to the terms of the contract would-be difficult to estimate and prove. All these circumstances indicate the intent of the parties to insert a fixed measure of damages and not penalty."
Where the intent of the parties is clear the use of the word " forfeit " in the clause providing for damages is not regarded as of much weight.
In the case of Worruff v. McClanahan (5 Strobh. (5 Carr), 115) it Avas held that forfeiture took the form of liquidated or stated damages where it was provided that the builder should forfeit $100 per month from a certain time until the actual completion of the house. The court said: " While we fear the plaintiff has made an agreement which will work harshly upon him, it is his contract."
In a case where the party in consideration with another conveyed to him 14 city lots for a consideration of $21,000, covenanted that he would by a certain day erect two brick houses or in default thereof pay to the grantor on demand the sum of $4,000, the court held that this sum was liquidated damages. (Pearson v. Williams, 24 Wend. (N. Y.), 244; S. C., 26 Wend. (N. Y.), 630.)
In the case of Halliday et al. v. United States (33 C. Cls. R., 468) it was held that after an extension of time for the completion of the contract the parties stipulated that in case of a failure to complete within the extended time the sum of $50 per day should be paid for such failure, that the sum assumed the form of liquidated damages equivalent to " the measure of injury or compensation " as used in the case of Van Buren v. Diggs (11 How., 361).
The attention of the court by the brief and argument of the counsel for the claimant is called to the case of Davis v. The United States (17 C. Cls. R., 201), in AArhich it is held in substance that the court is influenced largely by the reasonableness of the transaction in the determination of the question as to whether the stipulated sum is to be construed as penalty or liquidated damages.
In the case oí Edgar Thompson Works v. The United States (34 C. Cls. R., 205) it is said:
" Each case must be governedjby its peculiar facts, and'no general rule can be prescribed in doubtful cases to determine the question as to whether the provision is to be regarded as a penalty or to be enforced as a compensation for the injury. The contract of the parties will be enforced as to liquidated damages if conscionable, but in doubtful cases will be construed as a penalty, and thereby enforce against the delinquent party a responsibility only to the extent of allowing the injured party a just compensation for the injury sustained."
In the case of Smith & Co. v. The United States (34 C. Cls. R., 472) it was held that the stipulated sum was in law a penalty and not liquidated damages, and allowed only a deduction of $256, when, if computed on the basis of the amount specified, the damages and deduction would have amounted to the sum of $1,028.
The phraseology of the contract in this case, embracing the stipulation as to damages and the specification forming a part of such contract, is much more elaborate than the provisions of the contract in which the stipulations have been held to be a mere penalty. It is said in the latter part of section 39 of the general instructions for bidders that the amount of liquidated damages is determined by actual current expenditures for rent which is made necessary by lack of the new building and which cease upon its completion. But no liquidated damages in excess of $20,000 will be deducted.
As is said by the court in the case of Gammon v. Howe (14 Maine, 254), " there is great difficulty in extracting from the cases any settled rule by which it may be decided."
•The court must first consider the form in which the parties have expressed their purpose and determine, from the language which they have used, in the light of the circumstances and the nature and character of the subject-matter, to which class the stipulation belongs — to that of penalty or liquidated damages. While the courts have a tendency toward that of penalty, they have no hesitation in a clear case in holding that the parties have themselves settled the question of damages, and will enforce that construction of the agreement unless it results in unconscionable disadvantage to the delinquent party. In this case the words are most apt in indicating that the parties have intended to provide an assessed value upon the damages which would be caused to the defendants by a delay in the performance of the agreement.
The subject-matter of the contract belongs to that class which is not easily susceptible of proof of actual damages; and therefore it was most expedient, from the peculiar character of the agreement, that parties should fix the amount of damages. The building, being intended for the vast printing business of the Government, did not belong to the class of buildings the value of the rent and use of which could be easily determined by proof, and that criterion is cited in many decisions as a justification for holding that liquidated damages and not penalty should prevail in the construction of the agreement.
It is also provided that the United States shall, in addition to the said sum of $100 per day, have the right to recover from said party of the second part all costs of inspection and superintendence incurred by the United States during the period of delay.
The findings show that the work was delayed by the fault of the claimant for a period of fiitjr-two days, which, at the rate of $100 per day, amounts to the sum of $5,200; that during said delay the cost of inspection and superintendence amounted to the sum of $50; that the finishing of the building in the way of painting, which was done by the United States and which should have been done by the claimant, amounted to the sum of $413.55.
The findings show for all other delays, except as shown above, the defendants were in fault and had therefore no right of recovery as against the claimant. Deducting the amount for which the claimant is responsible on the basis of $100 per day, the amount of superintendence and inspection and the amount of work done by the defendants in the completion of the building from retained amounts by defendants, entitles the claimant to a judgment for $14,276.45, as shown in the conclusion of law.