Lord Elphinstone v Monkland Iron and Coal Co
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Lord Elphinstone v Monkland Iron and Coal Co 11 App Cas 332, HL[1] (29 Jun 1886) is a Scottish contract law case heard before the House of Lords, concerning the penal nature of lump sums to be paid in the event of a breach of contract where the breach may either cause serious or nominal damage.
Facts[edit]
The tenants in a mineral lease (Monkland Iron and Coal Co) undertook to level and soil over the slag hill, within twenty years from the 1st of January, 1863, provided the mineral lease should endure for that period, and in the event of its sooner coming to a termination, then within six months thereafter, or pay a “penalty” of £100 per acre ground of land that the tenants failed to restore by that date, to enable the owner of the land to complete the same.[1]
Judgement[edit]
The House of Lords held that the £100 charge was not a penalty, as the sum demanded was proportional to the extent of the failure of the tenants to perform their obligations under the contract.
In his judgment, Lord Watson stated the following:
When a single slump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage, the presumption is that the parties intended the sum to be penal, and subject to modification ... but where the payments stipulated are made proportionate to the extent to which the contractors may fail to implement their obligations, and they are to bear interest from the date of the failure, payments so adjusted with reference to the actual damage are liquidated damages.[1]
See also[edit]
References[edit]
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