Sanders v. Carter

• Decision Date: 27 March 1893
• Citation: 17 S.E. 345,91 Ga. 450
• Parties: SANDERS et al. v. CARTER.
• Court: Georgia Supreme Court

17 S.E. 345

91 Ga. 450

SANDERS et al. v. CARTER.

Supreme Court of Georgia

March 27, 1893

Syllabus by the Court.

1. An obligation in writing, by the terms of which one of the parties agrees to "make a deposit of one hundred and fifty dollars" with a designated person "as a guaranty or forfeiture" to be paid to the other party to the agreement in the event of the failure, refusal, or neglect of a certain corporation to convey certain specified realty within a given time to the promisee, the promisor waiving "all recovery by process of law or otherwise," is upon its face an agreement for stipulated damages; and it appearing by extrinsic evidence that the subject-matter of the agreement was such that damages resulting from a breach thereof could not be readily or accurately ascertained, which fact must have been in contemplation by the parties in fixing the amount of the forfeiture, and no facts being shown which would indicate that the sum so agreed upon was disproportionate unreasonable, or unjust, the whole amount named in the agreement could properly be recovered as liquidated damages.

2. The giving of a receipt which is beneficial to the party taking it, and which the other party is under no duty or obligation to give without being compensated therefor, is a sufficient consideration to support a contract to pay liquidated damages on the happening or not happening of a specified event.

Error from superior court, Paulding county; C. G. Jones, Judge.

Action on a contract by E. M. Carter against Sanders & Ables. Plaintiff had judgment, from which, and an order denying a new trial, defendants bring error. Affirmed.

A. L Bartlett and Geo. P. Roberts, for plaintiffs in error.

C. D McGregor and Will E. Spinks, for defendant in error.

LUMPKIN J.

1. What construction should be placed upon contracts similar to that sued on in the present action is a question which has long vexed and perplexed the courts both of this country and of England. It may be stated as definitely settled, however, that in determining whether the forfeiture named in an instrument of this kind is to be regarded as liquidated damages, or only in the nature of a penalty, much depends upon ascertaining the true intent of the parties. It was formerly held that, when it satisfactorily appeared that the parties contemplated that the amount specified in their contract should actually be paid upon a breach thereof, the agreement, in the absence of fraud, should be strictly enforced, as a court of law possesses no dispensing power, and cannot inquire whether the parties have acted wisely or rashly in respect to any stipulation they may have thought proper to introduce into their agreement. Much has pertinently been said in support of this rule, but difficulty seems to lie in its practical application, and the courts have latterly widely departed therefrom. In some of the earlier cases in which this departure was made the artificial reasoning was sought to be introduced that parties could not be presumed to have entered willingly and advisedly into an agreement manifestly unreasonable and unjust, and grossly disproportionate to the damages actually sustained. But it was found that this rule of construction could not consistently be applied in many instances, for, while it might appear that the exactions of the agreement were indisputably unjust and oppressive, the intention of the parties to so stipulate could not seriously be questioned. Accordingly, it has more recently been held, upon the broader ground of good conscience and natural equity, that although the intention to stipulate for liquidated damages be manifest, the court will regard the forfeiture named, if excessive, merely as a penalty, and award to the party injured by a breach of the agreement only such damages as he may have actually sustained. Many reasons which seem sound in principle have been advanced in support of this doctrine, and the trend of judicial decision now lies in the direction indicated. In delivering the opinion in the case of Basye v. Ambrose, 28 Mo. 39, it was said by Scott, J.: "No system of laws would command our respect, or secure our willing obedience, which did not to some extent provide against the mischiefs resulting from improvidence, carelessness, inexperience, and undue expectations on one side, and skill, avarice, and a gross violation of the principles of honesty and fair dealing on the other. *** It has been remarked that in reason, in conscience, in natural equity, there is no ground to say, because a man has stipulated for a penalty in case of his omission to do a particular act, (the real object of the parties being the performance of the act,) that if he omits to do the act he shall suffer an enormous loss, wholly disproportionate to the injury to the other party." The correct rule to be adduced from the leading authorities would therefore seem to be: Where the damages resulting from a breach of the agreement were evidently the subject of calculation and adjustment between the parties, and a certain sum was agreed on and intended as compensation, and is in fact reasonable in amount, it will be allowed by the court as liquidated damages; but, though the intention of the parties seems clear and manifest that a breach shall operate as a complete forfeiture of the entire sum named in the agreement, the court will decline to lends its assistance to enforce the payment of an amount which is grossly excessive, unreasonable, and unjust, and will treat the stipulation as in the nature of a penalty, and will award only such damages as the injured party may have actually sustained. Even with this guide, however, the subject is not entirely relieved of difficulty; and to the fact that the circumstances of each individual case present new and distinct considerations, difficult of correct determination, we apprehend, is due the conflict apparently still existing in decisions of the present day. For a full discussion of the subject under investigation, see 1 Suth. Dam. 475 et seq.; 1 Sedg. Dam. § 389 et seq.; 5 Amer. & Eng. Enc. Law, 24, 25. Our Code, §§ 2940, 2941, specially deals therewith. It is highly important, as has been seen, to determine in every case the real intent and purpose of the parties, and it is here that most frequently the greatest difficulty is encountered. In many instances the instrument which purports to set forth the contract is vague, indefinite, and uncertain, and consequently extrinsic evidence to explain the subject-matter of the agreement, its purpose, and the circumstances under which it was entered into, must necessarily be resorted to. The foregoing authorities furnish numerous tests which may be applied as throwing light upon the question. The language of the instrument itself must, of course, be primarily looked to and considered, though the use therein of the words "penalty" or "liquidated damages" will by no means always be conclusive. The term "forfeiture," in itself affords little evidence of intention, and, taken in connection with other expressions of the parties, appears to have been construed indifferently one way or the other. That the parties agree to deposit a specified sum as security for performance, using language which imports an understanding that upon a breach the holder is to pay such amount over to the injured party without further formality, will generally be held decisive of the intent to stipulate for liquidated damages. Other considerations, of equal weight, may often turn the scale. But the courts lay great stress upon the importance of considering, in connection with the instrument itself, the subject-matter of the agreement, and all the attendant circumstances of its execution. The matter for adjustment may be such that in the event of a breach the damages resulting therefrom would be difficult to readily or accurately ascertain or approximate. It is apparent that this is of signal importance, for in such case it may very reasonably be presumed that the parties had in contemplation the uncertainty in...