This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If a stipulation is one for liquidated damages, the amount contracted for may be recovered.1 Proof of actual damage is unnecessary.2 There must, however, be at least more than nominal damages.3 Furthermore, if the actual damages exceed those contracted for, the injured party is bound by the stipulation of the contract, and cannot recover the actual amount of damages.4 It is therefore held that a stipulation for liquidated damages applies to cases in which there has been a bona fide attempt to perform the contract, but does not apply to willful and deliberate injury, if the damages arising therefrom exceed those stipulated for.5 Such a provision in case of failure of water supply does not apply where such failure is due to defendant's failure to make repairs stipulated for.6 To prevent recovery of actual damages, the provision claimed to be for liquidated damages must furthermore be exclusive. If the party not in default is merely given an election on default to be exercised at his option, he is not thereby precluded from recovering damages.7 Thus in a sub-contract for building an ore dock, it was provided that if a material-man did not furnish timber according to contract, the contractor might buy it in open market and charge the necessary expense to the sub-contractor's account. This provision was held to be merely optional with the contractor, and not a stipulation for an exclusive measure of damages.8 A provision for a deposit as security is not a contract for liquidated damages so as to prevent the recovery of actual damages.9 So a provision in a lease for the deposit by the lessee with the lessor of a certain sum as security for performance and in case the tenancy is not sooner terminated, that it is to be applied on the rent for the last three months of the term, is not intended as liquidated damages if the lessee makes default before the end of the term..10
1 Sun, etc., Association v. Moore,
183 U. S. 642; affirming Moore v. Publishing Association, 101 Fed. 591; 41 C. C. A. 506; Van Tuyl v. Young, 23 Ohio C. C. 15; Pittsburgh, etc., Co. v. Tube Works Co.,
184 Pa. St. 251; 39 Atl. 76; Drum-heller v. Surety Co., 30 Wash. 530; 71 Pac. 25.
2 Clark v. Barnard, 108 U. S.436; Jacqua v. Headington, 114 Ind. 309; 16 N. E. 527; (City of) Salem v. Anson, 40 Or. 339; 56 L. R. A. 169; 67 Pac. 190; Kelso v. Reid, 145 Pa. St. 606; 27 Am. St. Rep. 716; 23 Atl. 323; American, etc., Works v.
Malting Co., 30 Wash. 178; 70 Pac. 236.
3 Hathaway v. Lynn, 75 Wis. 186; 6 L. R. A. 551; 43 N. W. 956.
4 Hennessy v. Metzger, 152 111. 505; 43 Am. St. Rep. 267; 38 N. E. 1058; O'Keefe v. Dyer, 20 Mont. 477; 52 Pac. 196; Jackson v. Hunt, - Vt. - ; 56 Atl. 1010.
5 West Chicago, etc., Ry. Co. v. Morrison, etc., Co., 160 111. 288; 43 N. E. 393.
6 Pengra v. Wheeler, 24 Or. 532; 21 L. R. A. 726; 34 Pac. 354.
7 Williston v. Mathews, 55 Minn. 422; 56 N. W. 1112.