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.
Under a contract for the sale of realty, a provision for the payment of a certain sum in case of breach, is held in some jurisdictions to be a provision for liquidated damages.1 Thus an agreement whereby either vendor,2 or vendee,3 to a contract for the sale of realty is to forfeit a deposit if he does not perform his part of the contract; or a covenant that if the vendor shall not in a specified time make a deed to vendee, the latter shall have a right to occupy the realty for a specified time;4 or a provision that the vendor shall remove an incumbrance within a specified time, and in default thereof shall pay a certain sum,5 or, where lots were sold for $3,050, a provision that the price should be $4,000 if in eighteen months the purchaser did not erect a certain building thereon,6 have been held valid as stipulations for liquidated damages. In other jurisdictions such a provision is held to be a penalty.7 Thus a contract to sell realty for $45,000 and to pay $5 an acre for each acre under twenty thousand,8 or a bond for six hundred dollars conditioned to convey realty worth three hundred dollars,9 have been held to he provisions for penalties. The two lines of cases are not all inconsistent; since where such provision is held to be a penalty the amount provided for is generally greatly in excess of the actual damages.
4 Wilkinson v. Colley. 164 Pa. St. 35; 26 L. R. A. 114; 30 Atl. 286.
1 See Sec. 1174, 1179.
2 Sanders v. Carter, 91 Ga. 450; 17 S. E. 345.
3 Womack v. Coleman. 89 Minn. 17; 93 N. W. 663; Talkin v. Anderson (Tex.), 19 S. W. 852.
4 Lorius v. Abbott, 49 Neb. 214; 68 N. W. 486.
5 Fasler v. Beard, 39 Minn. 32; 38 N. W. 755.
6 Everett Land Co. v. Maney, 16 Wash. 552; 48 Pac. 243.
7 0'Keefe v. Dyer, 20 Mont. 477; 52 Pac. 196; Monroe v. South (Tex. Civ. App.). 64 S. W. 1014.
(A provision to forfeit "as a penalty the sum of three hundred dollars.")
8 Gates v. Parmly, 93 Wis. 294; 66 N. W. 253; affirmed on rehearing-. 67 N. W. 739.