(2) because such loss of profits is ordinarily remote and not, as a matter of course, the direct and immediate result of the non-fulfilment of the contract; (3) and because most frequently the engagement to pay such loss of profits, in case of default in the performance, is not a part of the contract itself, nor can it be implied from its nature and terms. But it is equally well settled that the profits which would have been realized had the contract been performed, and which have been prevented by its breach, are included in the damages to be recovered in every case where such profits are not open to the objection of uncertainty or of remoteness, or where, from the express or the implied terms of the contract itself, or the special circumstances under which it was made, it may be reasonably presumed that they were within the intent and mutual understanding of both parties at the time it was entered into." 65. Damages may be either liquidated or unliquidated. By liquidated damages is ordinarily meant an amount fixed by the parties as compensation for a breach; by unliquidated damages is meant compensation not fixed, but to be ascertained in an action at law, ordinarily by a jury.""* 236 Parties entering into a contract frequently take into consideration the possibilities of a breach and provide what shall be the amount of compensation, in such case, payable to the injured party. And, if this be done and there be an agreement on default to pay a sum certain by way of liquidated damages, then that amount can be recovered.""" 66. Upon this point, however, there is a distinction. between liquidated damages and a penalty. By the latter is generally understood a sum of money to be paid in gross for the non-performance of an agreement which the debtor is required to pay over and above his original liability as a punishment." In effect, the difference between the two is 235 139 U. S. 199 (1891), citing Sedg. Meas. D. (7th Ed.), Vol. 1, p. 108; 110 U. S. 338 (1883); 9 Exch. (Eng.) 341 (1854), and other cases. 236 Inder. Com. L., p. 448. 237 16 M. & W. (Eng.) 346 (1847); L. R. 21 Ch. D. 243 (1882). 2386 Bing. (Eng.) 141 (1829); 7 Wheat. (U. S.) 13 (1822); L. R. 16 Ch. D. (Eng.) 675 (1881). this: The amount recoverable where a penalty is imposed is not the penal sum named as such, but only the damages actually sustained; the amount recoverable where liquidated damages are assessed is the sum agreed upon by the parties.""* The cases on the subject of penalties and liquidated damages are numerous and conflicting. The courts, in interpreting contracts with such clauses, will endeavor to arrive at the real intention of the parties, not being bound by the mere words used, but will look at the entire transaction and the peculiar circumstances of each case. In case of doubt, the courts are inclined to treat the sum named as a penalty because then the defendant is permitted to show the actual damage." 240 242 In general, and subject to what has just been said, some of the rules for the construction of such clauses are as follows: (1) Where the contract is for a matter of uncertain value, or the subject-matter is of such a nature that it would be extremely difficult to fix the actual damages by evidence, the parties may agree upon the sum to be recovered upon a breach thereof as liquidated damages; (2) where the contract is for a matter of certain value, a stipulation that upon breach an amount shall be paid in excess of that value will be construed as a penalty, and the injured party will be limited in his recovery to his actual loss;""" (3) where a contract contains a number of stipulations, the damages for the non-performance of some of which are certain and of others uncertain, and a fixed sum is named as damages for a breach of any of them, such sum is held to be a penalty." Upon the whole, however, the decisions are so conflicting that each case must be determined upon its own facts. 239 L. R. (1895) 2 Q. B. Div. (Eng.) 289; L. R. (1896) 1 Q. B. (Eng.) 626; 164 Mass. 457 (1894); 2 Allen (Mass.) 456 (1861). 240 L. R. 8 C. P. (Eng.) 70 (1872); 175 Mass. 595 (1900); 122 N. Y. 397 (1890); 83 Md. 203 (1896); 45 N. J. Law 525 (1883); 101 Mass. 334 (1869). 243 244 242 85 Ala. 552 (1888); L. R. (1892) 1 Q. B. 243 157 Ill. 186 (1895); 104 U. S. 771 (1881); 241 Ans. Cont. (8th Ed.), p. 329; 65 Fed. Rep. 794 (1895). Upon this question it has been said: "We must look to the language of the contract, the intention of the parties as gathered from all its provisions, the subject of the contract and its surroundings, the ease or difficulty of measuring the breach in damages, and the sum stipulated, and from the whole gather the view which good conscience and equity ought to take of the case." 245 Under certain circumstances the injured party may obtain in equity a decree for the specific performance of the contract, or an injunction to restrain its breach by the other party. 245 48 Pa. 450 (1865); 127 Pa. 289 (1889); 111 Iowa 693 (1900). |