PENALTIES AND BONUSES 163 



employer for every week during which the buildings should 

 remain unfinished. The contract also made other stipula- 

 tions, and provided that, in case it should not be in all things 

 duly performed by the contractors, they should pay 1,000 

 for liquidated damages. There was delay in completion, for 

 which the employer sought to recover the full penalty. The 

 Court held that the sum of 1,000 was a penalty, and that the 

 employer could only recover the actual damage occasioned by 

 delay. 



5. Principles deduced from the cases. The following prin- 

 ciples may be deduced from the decided cases : 



(a) Where the damage is altogether uncertain, and a definite 

 sum is specified in case of breach, it will be regarded as 

 liquidated damages. 



(b) Where a single sum is declared to be payable in case of 

 any of a number of distinct breaches of greater or less import- 

 ance, the Court will regard this as a penalty and therefore 

 subject to modification. 



(c) But where different sums are mentioned for different 

 breaches, the Court will regard the sums payable as liquidated 

 damages. 



(d) " The criterion whether a sum whether it is called 

 penalty or liquidated damages is truly liquidated damages, 

 and as such not to be interfered with by the Court, or is truly 

 a penalty which covers the damage if proved, but does not 

 assess it, is to be found in whether the sum stipulated for can 

 or cannot be regarded as a genuine pre-estimate of the cre- 

 ditor's probable or possible interest in the due performance of 

 the principal obligation." (Cape of Good Hope Government v. 

 Hills, 1906, 22 T. L. K. 589.) 



6. The framing of the penalty clause. The foregoing con- 

 siderations will have made it apparent that the engineer 

 should exercise some care in scrutinising the penalty clause. On 

 the one hand he should not penalise the contractor for every 

 little breach ; on the other, he should take care " to make the 

 punishment fit the crime." An excellent plan is embodied in 

 the penalty clause recommended by the Institute of Electrical 

 Engineers (Form HA., Cl. 39). It provides that, in case of 

 delay in completion, the contractor shall pay, as and for 

 liquidated damages, certain definite amounts reckoned on the 



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