Willson v. Mayor of Baltimore

Citations

• 83 Md. 203
• 34 A. 774
• 1896 Md. LEXIS 46

Syllabus

<p>Penalties and Liquidated Damages—Deposit Made in Part Performance of a Contract—Forfeiture of Deposit Upon Breach of Contract— Construction of Contracts—Measure of Damages.</p> <p>When a contract provides that in the event of a failure to perform it a certain sum shall be paid by the party in default to the other party, such sum is either a penalty or liquidated damages. If the sum designated is held to be liquidated damages, then upon breach of the contract that particular amount is recoverable. But if the sum is regarded as a penalty, its place in the contract gives it no weight, and a recovery for a breach will be limited to the extent of the injury actually sustained and proved. In the case of liquidated damages the whole of the sum named is recoverable upon default, although the actual damages be nominal, while in the case of a penalty, only such damages as have been really incurred and are satisfactorily shown can be recovered for a breach.</p> <p>Where a reasonable sum is stipulated to be paid as liquidated damages for the breach of a contract, it will be regarded as such and not as a penalty, when from the nature of the contract, the amount of damages arising from its breach are uncertain and cannot be ascertained upon an issue of fact.</p> <p>But when the damages arising from the breach are easily and exactly ascertainable, such stipulation is generally regarded as a penalty.</p> <p>In doubtful cases the inclination of the Court is to treat the stipulated sum as a penalty.</p> <p>Where in a contract for the sale of land the parties agree that the sum deposited by the purchaser in part payment shall be forfeited if he fails to carry out his contract, no part of such deposit can be recovered back in the event of a breach of the contract by the purchaser upon the ground that the forfeiture was in the nature of a penalty and that the actual loss to the vendor was less than the amount of the deposit.</p> <p>If the deposit be not made in part performance of th