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 three thousand and fifty dollars, a provision that the price should be four thousand dollars 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 forty-five thousand dollars and to pay five dollars 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 be 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.
11 Bartholomae & Roesing Brewing & Malting Co. v. Modzelewski. 260 111. 539, 109 N. E. 1058.
12 Decker v. Pierce, 191 Mich. 64, 157 N. W. 384.
1 See Sec. 2122 and 2127.
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.
4Lorius 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.
7O'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].