ment of fifty per cent of the rent or royalty specified in the schedule for all boots and shoes made during one month to be paid on the first day of the next, and if not paid on or before the fifteenth of that month, the whole amount of the schedule rates to become payable. In other words, by the terms of the contract, properly construed, the actual debt was $599.27, and the agreement to pay double the amount is in the nature of a penalty to insure the prompt payment of the sum actually agreed to be paid. Longworth v. Askran, 15 Ohio St. 370, is an authority sustaining this construction of the lease." [Held: The larger sum payable being a penalty was not recoverable.] Question 159: (1) A sells a machine for $100 to B under an agreement that B shall have 30 days credit, the price to be increased 50% if B does not pay within the 30 days. (2) A sells B a machine for $100, 30 days credit, 2% discount for payment within the 30 days. What price can A get in both of these cases? § 142. (Contracts, Sec. 110.) Certain sum payable for breach of any of several covenants of varying importance. Case 160. Wilhelm v. Eaves, 21 Oregon Reports, 194. Facts: This case involved the breach of an agreement whereby Eaves agreed to appoint Wilhelm as superintendent of a certain market and Wilhelm agreed to perform various duties as such superintendent, to keep the market clean and wholesome, to appoint special night watchmen, to keep open certain hours, etc. And the parties bound themselves "in the penal sum of $200,” "as fixed, settled and liquidated damages to be paid by the failing party to the other." Eaves discharged Wilhelm and he brought suit but proved no actual damages relying upon this provision in the agreement. Point Involved: That if a contract provides for the payment of a certain amount of money in the event of the breach of any of several undertakings, which are of varying importance so that the actual damage would differ in each case, the sum will be deemed a penalty and the actual damages must be proved. * 66* ** BEAN, J.: The decision of the question as to whether a given sum, provided in the contract, to be paid on a breach thereof, shall be considered as liquidated damages or as a penalty is often inherently difficult and there is much apparent conflict in the adjudged cases. The words 'liquidated damages' are not at all conclusive as to the character of the stipulation and the Courts are not bound by the language used by the parties and the tendency of the Courts is in favor of an interpretation which makes the sum a penalty. "While it is usually said that the intention of the parties is to govern in cases of this kind, 'such intention is determined by very latitudinary construction. To be potential and controlling that a stated sum is liquidated damages, that such must be fixed as the basis of compensation and substantially limited to it; for just compensation is the measure of damages. Parties may liquidate the amount by previous agreement; but where a stipulated sum is evidently not based on that principle, the intention to liquidate damages will either be found not to exist or will be disregarded, and the stated sum treated as a penalty. * * There may be deduced certain general rules. One of these rules is that when a contract specifying one certain sum as liquidated damages contains various stipulations * and the damages from the breach of some of which would be easily ascertainable * (and not as to the others), the stipulated sum will be regarded as a penalty and not liquidated damages, though the language of the parties be the strongest that could be employed to evince a contrary intent. "This rule is decisive of this case. This contract pro vides (for payment of $200 in case of breach). If then, this be regarded as liquidated damages, that precise sum would be recoverable for the breach of any of the covenants, however unimportant, or however easily the damages for a breach thereof could be ascertained the stipulated sum must be construed as a penalty (and actual damages assessed). Question 160. Was the sum stated in this case a "penalty". or "liquidated damages"? Why? § 143. (Contracts, Sec. 111.) Forfeiture of amounts paid. (Note: Whether an amount paid in performance of a con: tract, as in an installment contract, can be retained as liquidated damages, if so agreed, depends on whether the provision is or is not reasonable.) PART III OPERATION OF CONTRACTS Chapter 16. Operation as to Parties. CHAPTER 16 OPERATION AS TO PARTIES § 144. (Contracts, Sec. 112.) General rule. (Note: A contract has been defined in the first part of this subject as a certain type of agreement between parties. It creates obligations that are voluntarily assumed between persons, each of whom has chosen the other as the party with whom he will deal. We may accordingly state it to be the general rule that a contract operates to confer according to its tenor, rights and obligations upon the parties to such contract and upon no other person. A party to the contract has the right to enforce it, and he is bound by it. But no other party can claim rights under such contract; and no other party is bound by its obliga tions. To this general rule there are certain very important ex ceptions to be treated in the following chapters.) CHAPTER 17 BENEFICIARIES TO CONTRACTS § 145. General statement. § 146. Incidental beneficiary cannot sue. § 147. Beneficiary may sue when. § 145. (Contracts, Sec. 113.) General statement. (Introductory note: The right of a beneficiary who is not a party to a contract to sue thereon, has occasioned much discussion and much difference of opinion. It would not be advisable to attempt to review the authorities or to give anything like a general treatment of the subject here. With various qualifications, it seems fairly generally settled in the majority of the American states that one not a party to a contract but who will be benefited by the performance thereof, may sue if he is expressly mentioned or described in the contract as one upon whom a benefit is intended by the parties to be directly conferred by the contract or if he is what we may term a creditor beneficiary; that is one to whom an obligation is owing which is affected by the contract; but that any person who is merely incidentally affected, no matter in what measure, may not sue. Certain other rules have been followed in some cases as that a "donee beneficiary" may sue, but it does not seem wise to attempt an extensive discussion of the subject for our purposes. See the follow ing cases.) § 146. (Contracts, Sec. 114.) Incidental beneficiary cannot sue. (See case in following section.) § 147. (Contracts, Sec. 115.) Beneficiary may sue when. Case 161. Pennsylvania Steel Co. v. N. Y. City R. Co., 198 Federal Reports, 721, at p. 749. |