215 Mass. 269 | Mass. | 1913
The plaintiff’s right to recover depends upon the construction of a written agreement between Charles G. Wridgway, to whose interest he succeeds by assignment, and the defendants Gray and Hollander, formerly copartners under the name of Gray and Davis, and hereinafter called the defendants.
Wridgway was the owner of certain letters patent for a lamp shade for road vehicles. By the agreement in question he licensed the defendants to manufacture the shades for the period of one year; and further agreed not to permit any other lamp manufacturer in the United States to make them during the continuation of the contract, to protect the defendants in any litigation concerning the same and to protect the patent, if necessary; and also to renew the contract for three years if they should have complied with the terms thereof. The defendants on their part agreed to manufacture at least one thousand shades, the same to be of a quality such as would not injure the value of the patent, and each shade to bear the patent number, the inscription “Wridgway No-Glare Shade,” the date of patent and the consecutive license
The agreement contained the following provisions:
“The sum of $500.00 (five hundred dollars) is hereby deposited by parties of the second part, with party of the first part, as security for the faithful performance of this agreement on their part to be performed, and said $500.00 (five hundred dollars) is to be applied to the last five hundred (500) shades manufactured by the parties of the second part, at the end or termination of this contract.
“It is further agreed that if parties of the second part shall fail to comply with terms of this contract, and shall fail to properly number all shades manufactured by them, or to make settlements as hereintofore [sic] stated, the said sum of $500.00 (five hundred dollars) deposited, as aforesaid, shall be forfeited to party of the first part, as fixed, liquidated and ascertained damages, and the contract between the parties hereto shall terminate and become null and void.”
The only breach of this agreement specified in the bill of complaint is the failure to manufacture and pay for more than twenty-five shades. The plaintiff contends that the provision relating to the deposit of $500 should be treated as a penalty and void, that the actual damages should be assessed, and that the defendants, by failing to manufacture the guaranteed number of lamps, became indebted to him in the sum of $1,000 with interest thereon. He undertakes to apply on account of this sum the $25 received from the defendants for the shades manufactured, and the $500 deposited by them, and now seeks to recover the alleged balance of $475 with interest.
We are of opinion, however, that a fair interpretation of the agreement makes it manifest that the parties intended this $500 to be liquidated damages and not a penalty in the event of a breach. In fact they have expressly so stated in the language of the second paragraph above quoted, designating the money deposited as “fixed, liquidated and ascertained damages.” And as was said by Holmes, C. J., in Guerin v. Stacy, 175 Mass. 595, 597, “we heartily agree with the Court of Appeals in England that so far as
It is true that the use of the words “liquidated damages” is not decisive, and in some cases, notwithstanding such designation, it may be apparent from the terms of the entire contract and an examination of the subject matter that the money is to be treated as a penalty. But such is not the situation here. The contract contained numerous stipulations for a breach of which it would be difficult, if not practically impossible, accurately to determine the damages. Such, for instance, are those requiring the defendants to keep up the quality of the shades, to mark and number each one as provided in the agreement, to keep and render accurate accounts, and to settle for royalties monthly. Considering the subject matter of the contract, it was a territorial right for a newly patented lamp, the success of which was problematical. Apparently the defendants were willing to risk not more than $500 in the venture in addition to the $1 .to be paid for each lamp shade they could find a customer for; and the plaintiff was willing to accept the certainty of that amount, with the prospect of more in the event of the defendant’s success in introducing the shades to their customers.
It is urged by the plaintiff, however, that the first paragraph quoted from the agreement brings the case within the general rule of construction that where a sum is to be paid in case of a breach of any of several distinct stipulations of various importance, and some of them are for the payment of fixed amounts of money, it will be construed as a penalty. Fish v. Gray, 11 Allen, 132. Wallis v. Smith, 21 Ch. D. 243. While the agreement is not free from doubt, on the whole we are of opinion that this rule has no application here. In the first paragraph the parties were providing for what would be done if the contract should be complied with, and the full number of one thousand shades manufactured. In that event the $500 was to be security, not in the sense of a penalty, but simply as a fund from which payments should be made for the last five hundred shades manufactured. In the second paragraph the parties made provision for the event of a breach of the
A majority of the court are of opinion that the plaintiff, by retaining as his property the $500, has received all to which he is entitled under the agreement, and that the demurrer must be sustained. Guerin v. Stacy, 175 Mass. 595, 597. Garst v. Harris, 177 Mass. 72. Morrison v. Richardson, 194 Mass. 370. In accordance with the terms of the report the bill is to be dismissed with costs.
So ordered.