CHAPTER XV 



PENALTIES AND BONUSES 



1. Generally 



2. Legal effect of the penalty 



clause ... ... ... 



3. Penalty or liquidated 



damages 



4. Danger of imposing too 



large a penalty ... ... 



5. Principles deduced from 



the cases 



6. The framing of the penalty 



clause 



7. Severity of the penalty 



clause ... 



8. Interference by employer 166 



PAGK 



Delay in commencing work 167 

 Effect of a strike and ad- 



rantage of strike clause 167 

 Employer not to decide as 



to penalties 168 



Powers and duties of 



engineer ... 168 



Terms of the contract as 



to extension of time to 



be observed ... ... 170 



Penalties in contracts with 



local authorities ... 171 

 Bonus clauses 171 



1. Generally. Every contract which is entered into for 

 the construction of machinery, the building of a ship, or other 

 similar works, contains a clause specifying the time within 

 which the work is to be completed. As the damages which 

 may result from the non-observance of this clause are difficult 

 to estimate, the written document usually provides a penalty 

 which is to be paid by the contractor or manufacturer if he 

 fails to carry out his obligation ; but inasmuch as hardship 

 may result from a very strict enforcement of the time-limit, 

 the time lost owing to any cause which is or may reasonably 

 be in the contemplation of the parties when the contract is 

 signed, is usually excluded, and no penalty is exacted in respect 

 of time so lost. 



It is obvious, however, that there are many causes of delay 

 in the execution of a contract which cannot possibly be fore- 

 seen or allowed for by the employer or the contractor at the 

 date of the agreement. Extra work may have to be undertaken 

 either at the request of the employer, or because of some delay 

 or difficulty which could not possibly have been taken into 

 account by the contractor when the tender was made. In 

 these circumstances it is obvious that some system has to be 



