agreed. "The application of this principle becomes more manifest in cases where a public interest or policy supervenes, as where, for non-compliance by stockholders in corporations engaged in undertakings of a public nature with the terms of payment of instalments due on account of their shares, by which a forfeiture of the stock and of all previous payments thereon has been incurred and declared, the courts refuse to grant relief." 33 If the seller reclaims the property, there is no doubt that he thereby destroys his right to sue on the contract for unpaid instalments.34 8792. Civil Law. The penal obligation was known to the Roman Law and originally it seems recovery of the full penalty was permissible. 35 Later it was recognized that the amount named as penalty was not conclusive. If it were inadequate more might be obtained and if it were excessive the amount might be reduced. 36 Penal 33 Clark v. Barnard, 108 U. S. 436, 456, 27 L. Ed. 780; citing Sparks v. Proprietors of Liverpool Water Works, 13 Ves. 428; Prendergast v. Turton, 1 You. & Col. Ch. 98; Naylor v. South Devon Railway Co., 1 De G. & Sm. 32; Sudlow v. The Dutch Rhenish Ry. Co., 21 Beav. 43. 34 In Waite v. Stanley, 88 Vt. 407, 92 Atl. 633, the court said:-"Under the contract, the promise of the vendor to convey the property constituted the consideration for the vendee's promise to pay the purchase money (Ferry v. Stephens, 66 N. Y. 321), and since by the decree in the equity case all interest of the vendee was foreclosed, by reason of which the contract was ended, and the absolute title to the property reinstated in the vendor, there was no longer any consideration for the vendee's promise to pay the purchase price. 'A court of Chancery regards the transfer of real property in a contract of sale and the payment of the price as correlative obligations. The one is the consideration of the other; and the one failing leaves the other without a cause.' Redfeld v. Woodfolk, 22 How. 318, 16 L. Ed. 370; Washington v. Ogden, 66 U. S. (1 Black) 450, 17 L. Ed. 203. Thus the matter stood at the time of the trial of this action at law in the court below, and, the item in dispute being then without consideration, the defendant was not liable therefor. See Sawyer v. McIntyre, 18 Vt. 27; Arbuckle v. Hawks, 20 Vt. 538; Graff's Executrix v. Kelly's Executors, 43 Pa. 453, 82 Am. Dec. 580; Day v. Lowrie, 5 Watts (Pa.), 412; Moore v. Smith, 24 Ill. 512." 35 Justinian's Inst. 3, 15, 7 (Moyle's 5th ed.). 36 Hunter's Roman Law, 3d ed. 652, citing from Dig. 44, 4, 4. "Cornelius compromised a claim against Mævius for 60 aurei, but Mævius inconsiderately agreed to a penalty of 100 aurei if he did not keep the terms of the compromise. Cornelius could not recover more than was really due—namely, 60 aurei; and if he demanded more, could stipulations in a contract of sale, however, were rigidly enforced. 37 41 In modern European Codes the subject is not dealt with on uniform principles. The French Code provides "When the contract stipulates that the party who fails to perform his obligation shall pay a certain sum as damages, neither a greater nor a less sum can be granted the other party;"' 38 and the extensive copying of the French Code has established the same provision in other countries.39 The French law prior to the enactment of the Code permitted the penalty when excessive to be reduced by the court. 40 Even under the Code the penalty may be modified if the obligor has performed in part; 41 and in any event, the court is given a limited power to permit delayed performance of the obligation, thereby saving the penalty.42 The German Civil Code has a more complete protection against excessive penalties. It provides "If a forfeited penalty is disproportionately high, it may on motion of the debtor be reduced by a judgment to a proper amount. In judging as to the adequacy, every rightful interest of the creditor, not only the property interest,-is to be considered. After payment of the penalty a reduction is excluded." 43 So in the Swiss Federal Code of Obligations, the judge is given power to reduce penalties which he regards as excessive.44 § 793. A condition may involve a penalty or forfeiture. A condition may be as penal in its effects as a promise to pay a penalty. Not only is this true in conveyances, 45 but in contracts. For instance, if a building contract provided that the builder should build a house and finish it by October 1st, Thus a be defeated on the ground of bad "Hunter's Roman Law, 652. 39 See, e. g., Civil Code of Italy, Art. 1214; Civil Code of Spain, Art. 1154. 401 Evans' Pothier on Obligations (2d Am. Ed.), p. 162, and this principle is preserved in the Code of Louisiana, § 2127. 41 Civil Code of France, Art. 1231. 42 Civil Code of France, Art. 1244, and see Fuzier-Herman et Darras, Code Civil, annoté vol. 3, p. 90, 17. 43 German Civil Code, § 343. 44 Art. 163 (Art. 182 of Code of 1881). 45 See Sanitary District v. Chicago &c Trust Co., 278 Ill. 529, 116 N. E. 161. and there was a separate stipulation that failure to do so should entail a forfeiture of the whole price on the building, every court would hold this stipulation a penalty and unenforceable. The transaction may, however, take this form; the builder might promise, as before, to build, and the owner of the premises contract to pay him $10,000 if he completed the house by the first of October. The substance of the two bargains is the same; it is only the form which differs, and relief against the effect of penalties should depend as little as possible upon form. The loss of the builder's labor and materials for a slight default also involves as real a forfeiture as is provided for in a mortgage. The doctrine giving relief from penalties and forfeitures originated in courts of equity, and if form had been a controlling situation, it would never have been granted, for in form the penal obligation was perfect. It may be said that in the second case supposed, the price fixed is not merely for the house but for the chance of having a house on October 1st. This may be true but it may also be true as matter of substance in the case as first put. Whether it is true in a particular case is a question of fact. If the happening of the condition very largely enhances the value of the promisee's performance, the failure to perform it should largely diminish the promisee's rights; but if by the terms of the contract the consequences of failing to fulfil the condition is that the promisee is deprived of all rights whatever, though he has materially enriched the promisor, the provision is obviously penal in character. Still more clearly where the performance of the condition is not in itself of material value will this reasoning be applicable. The presentation of an architect's certificate is in itself of no value, it is only useful because it proves that a building has been properly completed. To deny recovery altogether to the builder who has failed to comply with a condition requiring an architect's certificate as a prerequisite to the recovery of the price for the building is a plain forfeiture if the house has in fact been well built. But even in connection with direct stipulations for damages or penalties, it has been seen that the tendency of modern courts is to uphold the agreements of the parties unless clearly unconscionable. The same disposition is even more evident in dealing with conditions. Such relief as is granted is also generally given either by a strained construction of the contract 46 or by allowing recovery on the basis of quasi-contract rather than by enforcement of the contract in spite of admitted non-performance of a condition. Nevertheless in some cases, though a condition precedent has confessedly not been performed, recovery is allowed on the contract itself, when the consequences of enforcement of the condition would result in a severe forfeiture or penalty, especially if a contingency has occurred which renders performance impossible and which presumably was not in the contemplation of the parties when they made the agreement.47 § 794. Excuse for non-performance of a condition requiring a certificate of an architect or engineer. Almost all contracts for building or engineering work of any importance provide that payment shall be made only when a certificate has been obtained from a supervising architect or engineer that the work has been performed as required by the specifications in the contract. In accordance with principles previously considered 48 the production of the certificate will "Conditions providing for disabilities and forfeitures are to receive when the intent is doubtful a strict construction against those for whose benefit they are introduced." Hoffman v. Ætna F. Ins. Co., 32 N. Y. 405, 88 Am. Dec. 337, quoted in Pyle v. Pyle, 260 Pa. 532, 103 Atl. 918. See also supra, § 620. In speaking of a condition in an insurance policy the New York Court said in Matthews v. American Central Ins. Co., 154 N. Y. 449, 463, 48 N. E. 751, 39 L. R. A. 433, 61 Am. St. Rep. 627: "The insured was bound by contract to do certain acts, as conditions precedent to the right to recover, and was under a legal obligation, if there were obstacles in the way, of making a reasonable effort to remove them. (Howland v. Edmonds, 24 N. Y. 307, 308; Porter v. Kingsbury, 71 N. Y. 588; Reining v. City of Buffalo, 102 N. Y. 308, 6 N. E. 792.) If, after due diligence, they had proved insurmountable for a time, the delay would have been excusable, and performance at the earliest practicable moment thereafter would have been sufficient, but to excuse non-performance it must appear that the act to be done could not, by any reasonable means, have been accomplished. Mere difficulty of performance is not enough. (Wheeler v. Conn. Mut. L. Ins. Co., 82 N. Y. 543, 551, 37 Am. Rep. 594.)” In the numerous cases on insurance policies classed under waiver, the unwillingness of the court to give a condition its literal effect when a forfeiture of the rights of the insured would thereby be caused, is frequently emphasized. 48 Supra, § 677. be excused if the failure to obtain it is due to the promisor's own fault. This will be the case where by collusion with the architect or engineer the owner induces him to refuse to give a certificate which has been earned. 49 It may be supposed, however, that without any collusion on the part of the promisor the architect or engineer fraudulently, maliciously, or otherwise, refuses to examine the work or refuses to exercise an honest judgment, and will not give a certificate. In England the builder is without relief in such a case. 50 The builder has taken his chance, it is said, of being able to cause the condition precedent to happen. It is not the promisor's fault that the condition has failed, and he may therefore take advantage of the failure. But in the United States recovery is generally allowed under these circumstances without production of a certificate.51 In connection with these cases may be considered 49 Smith v. Howden Union (Q. B. D.), 2 Hudson on Building Cont. (4th ed.) 156; Batterbury v. Vyse, 2 H. & C. 42; American-Hawaiian, etc., Co. v. Butler, 165 Cal. 497, 133 Pac. 280; St. Louis, etc., R. Co. v. Kerr, 153 Ill. 182, 38 N. E. 638; Walsh v. North American Cold Storage Co., 260 Ill. 322, 103 N. E. 185; Crawford v. Wolf, 29 Ia. 567; Hebert v. Dewey, 191 Mass. 403, 410, 77 N. E. 822; Smith v. White, 5 Neb. 405; Whelen v. Boyd, 114 Pa. 228, 6 Atl. 384; Thaler v. Greisser Construction Co., 229 Pa. 512, 79 Atl. 147; Mills v. Paul (Tex. Civ. App.), 30 S. W. 558. See also Linch v. Paris, etc., Elevator Co., 80 Tex. 23, 15 S. W. 208; Markey v. Milwaukee, 76 Wis. 349, 45 N. W. 28. If the promisor improperly induced the decision of the third party it is immaterial that the latter was innocent of fraud. Forrest City Box Co. v. Sims, 208 Fed. 109, 125 C. C. A. 337. So where the owner fails to employ an architect, Feldman v. Goldblatt, 133 N. Y. S. 945, 75 Misc. 656, or discharges him, Catanzano v. Jackson, (Ala. 1916)), 73 So. 510, he cannot insist on the condition. 50 Clarke v. Watson, 18 C. B. (N. S.) 278; Smith v. Howden Union (Q. B. D.), 2 Hudson on Building Contracts (4th ed.), 156. See also In re Noth and Cardiff Corporation, [1918] 2 K. B. 146. 51 (In many of the following cases there is merely a dictum supporting the text.) North American Ry. Const. Co. v. R. E. McMath Surveying Co., 116 Fed. 169, 54 C. C. A. 27; Utah Construction Co. v. St. Louis &c Equipment Co., 254 Fed. 321; Hatfield Special School Dist. v. Knight, 112 Ark. 83, 164 S. W. 1137; Ferguson v. Christensen, 59 Colo. 42, 147 Pac. 352; Michælis v. Wolf, 136 Ill. 68, 26 N. E. 384; McDonald v. Patterson, 186 Ill. 381, 57 N. E. 1027; Foster v. McKeown, 192 Ill. 339, 61 N. E. 514; Hebert v. Dewey, 191 Mass. 403, 411, 77 N. E. 822; Marsch v. Southern New Eng. R. Corp., 230 Mass. 483, 120 N. E. 120; Eldridge v. Fuhr, 59 Mo. App. 44; Chism v. Schipper, 51 N. J. L. 1, 16 Atl. 316; Bradner v. Roffsell, 57 N. J. L. 32, 412, 29 Atl. 317; Bean v. Miller, 69 Mo. 384; Justice v. Elwert, 28 Or. 460, 43 Pac. 649; Perry v. Hunt, 62 Or. 256, 125 Pac. 295; Bentley v. Davidson, 74 Wis. 420, 43 N. W. 139. |