References: [1906] AC 368
Coram: Lord Dunedin
(Cape of Good Hope) A railway construction contract provided that in the event of a breach by the contractor he should forfeit ‘as and for liquidated damages’ certain percentages retained by the Government of the Cape of Good Hope of money payable for work done as a guarantee fund to answer for defective work and also certain security money deposited with the Government. The amount of that retained money depended on the progress of contracts other than the one in suit.
Held: The clause was a penalty. The principle to be deduced from the Clydebank case was that the criterion of whether a sum was a penalty or damages was to be found in whether the sum in question ‘can or cannot be regarded as a ‘genuine pre-estimate of the creditor’s probable or possible interest in the due performance of the principal obligation.’ The question of whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of breach.
The Clydebank case was decided according to ‘the rules of a system of law where contract law was based directly on the civil law and no complications in the matter of pleading had ever been introduced by the separation of common law and equity.’
This case cites:
- Cited – Clydebank Engineering Co -v- Castaneda HL (Bailii, [1904] UKHL 3, (1904) 12 SLT 498, (1904) 7 F (HL) 77, [1905] AC 6)
The House considered a contract for the construction by a Scottish shipbuilder of four torpedo boats for the Spanish government. The contract provided that: ‘The penalty for late delivery shall be at the rate of £500 per week for each vessel’. . . - Cited – Public Works Commissioner -v- Hills PC ([1906] AC 368)
(Cape of Good Hope) A railway construction contract provided that in the event of a breach by the contractor he should forfeit ‘as and for liquidated damages’ certain percentages retained by the Government of the Cape of Good Hope of money payable . .
(This list may be incomplete)
This case is cited by:
- Cited – Public Works Commissioner -v- Hills PC ([1906] AC 368)
(Cape of Good Hope) A railway construction contract provided that in the event of a breach by the contractor he should forfeit ‘as and for liquidated damages’ certain percentages retained by the Government of the Cape of Good Hope of money payable . . - Cited – Dunlop Pneumatic Tyre Company Ltd -v- New Garage and Motor Company Ltd HL ([1915] AC 67, Bailii, [1914] UKHL 1, (1904) 12 SLT 498, (1904) 7 F (HL) 77)
The appellants contracted through an agent to supply tyres. The respondents contracted not to do certain things, and in case of breach concluded: ‘We agree to pay to the Dunlop Pneumatic Tyre Company, Ltd. the sum of 5 l. for each and every tyre, . .
(This list may be incomplete)
Last Update: 02-Jan-16 Ref: 440838
