Atlantic Refining Co. v. Barnard

Sanderson, J.

The parties entered into a written agreement by which the plaintiff was to install and lend to the defendant a complete equipment for retailing gasoline and motor oils. The plaintiff is seeking to recover the amount stipulated in the contract as the agreed purchase price of the system and improvements in case of breach of the agreement by the defendant. The breaches now relied upon are the discontinuance of the use of the products of the plaintiff, the removal of the equipment and the use of Standard Oil products on the premises. The questions, whether these breaches, in so far as they were disputed, occurred and whether they were justified by the conduct of the plaintiff, presented only questions of fact.

The terms of the contract fixing the amount to be recovered in case of default by the defendant, after providing for certain specific things which the defendant agreed to do, are as follows: “in the event of the party of the second part [the defendant] becoming financially embarrassed or involved, insolvent, or involved in bankruptcy, or any other way the said party of the second part shall fail to keep or perform the terms and conditions of this Agreement, then, and in such case, the said party of the second part shall be construed and is hereby declared to be in default hereunder and the party of the first part may, at any time at its option . . . take immediate possession of the said system . . . and charge the party of the second part with the sum of fifteen hundred forty-four ($1,544.00) Dollars, which, it is agreed, is the fair and reasonable cost of the installation and removal of the system and the cost of the improvements mentioned hereunder, or allow said system to remain and charge the party of the second part with the sum of twenty-three hundred sixteen ($2,316.00) Dollars, the agreed value of the system and improvements, and thereupon said sum charged shall immediately become due and payable by the party of the second part, and upon the payment of the said sum title to said system and improvements is to pass from the party of the first part to the party of the second part.” The finding for the plaintiff was evidently for the second sum and interest.

The contract makes no express provision for rescission or abandonment by the defendant, in case of material breach by the plaintiff, but the defendant’s legal rights would be preserved in case of such breach, and it is apparent that one of the issues tried was whether the defendant was justified in refusing to go on with the contract because of breaches of the agreement by the plaintiff. The defendant used the equipment and bought and sold oil under the contract for . several months and the only reason given at the time for abandoning the contract was that the plaintiff charged him the same price for gasoline as others were selling it for.

The defences that the contract was obtained by fraud and was unconscionable were not made out. As construed by us the contract was not so unreasonable that no man in his senses would enter into it. Earl of Chesterfield v. Janssen, 2 Yes. Sr. 125, 155. See Hume v. United States, 132 U. S. 406. The contention of the defendant is that the provisions of the contract for an agreed price or liquidated sum for the property in case of any breach of agreement by the defendant are in the nature of a penalty and void.

It did not appear that the agreed price was disproportionate to the damages which might be sustained by breach or was in excess of the value of the property to which the defendant was to gain title. The court said, in Chase v. Allen, 13 Gray, 42, 45: “If the contract consists of several stipulations, the damages for a breach of which cannot be well ascertained and valued, then the parties are deemed to have intended that the sum agreed on shall be treated as liquidated damages, from which there is to be no deduction.” The stipulations are directed toward one end and that is the continued use of the apparatus for the sale of the plaintiff’s products. The violation of these provisions would seriously impair the rights of the plaintiff and damages for their breach might not be easy of ascertainment. See Lynde v. Thompson, 2 Allen, 456, 459.

There is no legal objection to parties agreeing in advance to the value of property loaned and that, upon the happening of a certain event in the control of the borrower, he will buy the property at the agreed price. When the parties have made such an agreement the amount to be paid for the property is not in the nature of a penalty and the parties are bound by the agreement in the absence of fraud. The sums agreed upon are valid provisions whether considered as liquidated damages or the price which the defendant was to pay for property in case of breach of contract by him. Exceptions not argued are treated as waived.

Exceptions overruled.