Liquidated damages - Building Contract Claims - page 50

motor cars. He was to pay the claimants the sum of £250 if he should breach
the agreement in any of the three following ways: by selling cars or parts at
below the list price; by selling cars to persons or firms engaged in the motor
car industry; and by exhibiting cars at any exhibition without the claimants'
written permission. A majority of the Court of Appeal held the provision to
be a penalty, and therefore unenforceable, on the basis that the breaches
were not of the same kind. The claimants had argued that the reasoning
behind the provision was to guard against damage to their business by the
wholesale undercutting of the list prices. To that extent, the argument was
the same as was put forward in Dunlop v. New Motor . The argument failed,
because the breaches in Dunlop , although different in degree, were of
the same type and each of the breaches could clearly be seen to have the
same ultimate effect. In Ford , the breaches were quite different, in degree,
type and result. The deciding factor appears to have been the fact that the
same figure of £250 could not be considered as a genuine pre-estimate in
respect of each of the three sets of breaches. On the basis of the judgment, it
appears that the claimants could have avoided trouble by fixing different
sums in respect of the three types of breaches. Alternatively, they could
have fixed a sum of liquidated damages for the breach of selling below list
price and sued in respect of the other breaches to obtain whatever damages
they could prove.
It is debatable whether there were two breaches or just one in the situation
considered in Aktieselskabet Reidar v. Arcos 137 . This concerned delay in
loading cargo for which demurrage was stipulated. The meaning of demur-
rage has been stated thus:
'The word ''demurrage'' no doubt properly signifies the agreed add-
itional payment (generally per day) for an allowed detention beyond a
period either specified in or to be collected from the instrument; but it has
also a popular or more general meaning of compensation for undue
detention . . . ' 138
This meaning is very close to liquidated damages, particularly as commonly
encountered in a construction situation, i.e. for delay in completion. The
court appears to have dealt with demurrage in exactly the same way as
liquidated damages. The principles to be derived from this case are thought-
provoking. In essence, the facts are simple. The defendants failed to load a
cargo at the agreed rate and as a result the ship was detained beyond the
time stipulated. The delay also meant that the ship was only allowed to
carry a winter cargo instead of the heavier summer cargo and the claimants
suffered loss of freight. The claimants brought the action to recover demur-
rage (liquidated damages) for the period the ship was detained in port
beyond the lay (allowed) days together with, as damages, the difference
between the amount of freight the claimants would have earned if the
137 [1926] All ER 140.
138 Lockhart v. Falk (1875) LR 10 Exch at 135 per Cleasby B.