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.
In a contract for the sale of personal property, a provision for the payment of a reasonable sum in case of breach, has been held to be liquidated damages.1 A provision for paying a reasonable sum per day for delay in delivery of the property sold,2 as a provision for a certain reasonable amount per day for failure to place an engine and boiler in a barge,3 or a provision for paying ten dollars a day for delay in delivering church pews,* or a provision for paying fifty dollars a day for delay in delivering turbines,5 or a provision for deducting fifteen cents a hundred feet for delay in delivering logs, thereby exposing them to the weather for a longer time,6 have each been held to be a provision for liquidated damages. So a covenant to pay five dollars a day for delay in delivering an engine is held to be a provision for liquidated damages.7 If the amount contracted for is unreasonable, it will be treated as a penalty.8 Thus a contract to pay fifty dollars a day for delay in delivering an engine, was held to be a contract for a penalty.9 If a gross sum is to be paid for breach of the contract, the provision is more likely to be treated as a penalty. Thus under a contract for purchasing a crop of oranges while on the trees for a lump sum, a provision that the purchaser is to pay the vendor fifteen hundred dollars as part payment, and that if the purchaser fails or refuses to comply with the provision of the contract, such payment shall be forfeited, was held to be a penalty.10 A provision for payment by the vendee of twenty per cent of the invoice price in case of his countermanding the order, has been held to be a penalty.11
26 (City of) Madison v. Engineering Co., 118 Wis. 480; 95 N. W. 1097.
27 Lennon v. Smith, 124 N. Y. 578; 27 N. E. 243.
1 Kilbourne v. Lumber Co., 1ll Ky. 693; 64 S. W. 631; Lynde v. Thompson, 2 All. (Mass.) 456.
2 Pressed Steel Car Co. v. Ky., 121 Fed. 609; 57 C. C. A. 635; American, etc., Works v. Malting Co., 30 Wash. 178; 70 Pac. 236.
3 Manistee Iron Works Co. v. Lumber Co., 92 Wis. 21; 65 N. W. 863.
4 Illinois Central Ry. v. Cabinet Co., 104 Tenn. 568; 78 Am. St. Rep. 933; 50 L. R. A. 729; 58 S. W. 303.
5 Wood v. Paper Co., 121 Fed. 818; 58 C. C. A. 256.
6 Kilbourne v. Lumber Co., 1ll Ky. 693; 64 S. W. 631.
7 Hardie, etc., Co. v. Oil Mill, -Miss. -; 36 So. 262.
8 Glasscock v. Rosengrant, 55 Ark. 376; 18 S. W. 379.
9 Iroquois Furnace Co. v. Mfg„ Co., 181 111. 582; 54 N. E. 987.