28 BULLETIN 1106, U. S. DEPARTMENT OF AGRICULTURE. 
to this fact. The court emphasized the fact that the association was 
something more than a mere selling agency, as it dealt with mem- 
bers and nonmembers. Some weight was apparently attached to the 
fact that the association often paid nonmembers more for their hogs 
than it paid members. 
In a later case * the Supreme Court of Iowa held a by-law of a 
cooperative association invalid as in restraint of competition which, 
among other things, provided that any member should pay 1 cent 
per bushel as liquidated damages for all grain which he might sell 
to competitors of the association who might offer more for grain 
than the association. It appeared that a member sold 13,000 pounds 
of pork and 4,000 bushels of oats to competitors of the association 
in a particular market, and the association attempted to deduct 
$10.50 on this account, in accordance with the by-law, from dividends 
amounting to $45.25 which were due him. The member then brought 
suit against the association to recover the entire amount, $45.25, and 
won. In holding the by-law invalid in this case, the court did so on 
the authority of the earlier case which has been discussed. 
In a Colorado case °° a by-law provided that stockholders might 
sel] grain to competitors of the association in a particular town, by 
paying 1 cent per bushel to the association for all grain so sold. A 
stockholder who had agreed to the by-law sold 3,500 bushels of 
grain to a competitor of the association, and it brought suit against 
him to recover $35. The by-law was held invalid on the ground that 
it was in restraint of competition, and the association lost the suit. 
In this case the association dealt with members and nonmembers. 
In many of the States there are statutory provisions relative to 
liquidated damages, and such provisions should be carefully heeded.*” 
Whether the provision in the by-law or the contract of an associ- 
ation which purports to require a member to pay a certain sum ot 
money to the association in case he disposes of produce or live stock 
outside the association will be held valid in a particular State will 
depend upon the constitution, statutes, and general law thereof. 
In all States the amount named as liquidated damages should be 
a reasonable one and not an amount manifestly in excess of the 
damages that may be suffered. The by-laws in the Iowa and Colo- 
rado cases were held invalid on the theory that they were opposed 
to public policy in that they tended to restrain trade or competi- 
tion. No statute seems to have been involved in any of the cases 
relating to cooperative associations in which the question of the 
legality of liquidated-damage clause provisions was raised. 
% Ludewese v. Farmers’;M. C. Co., 164 Iowa 197, 145 N. W. 475. 
8 Burns v. Wray Farmers’ Grain Co., 65 Colo. 425, 176 Pac. 487. 
% Stark v. Shemada, (Calif.) 204 Pac. 214. 
