Civil Engineering Reference
In-Depth Information
delivery. One of the arguments put forward by Clydebank was that after the delivery
date the greater part of the Spanish fleet had been sunk by the American fleet. In effect,
they argued that they had done the Spanish government a favour by being late in
delivery.
Held:
The sum of £500 a week was recoverable as liquidated damages. Clydebank's conten-
tions were rejected.
LORD HALSBURY LC: Then comes the question whether, under the agreement, the damages are
recoverable as an agreed sum, or whether it is simply a penalty to be held over
in terrorem
, or
whether it is a penalty so extravagant that no court ought to enforce it. It is impossible to lay
down any abstract rule as to what might or might not be extravagant without reference to the
principal facts and circumstances of the particular case. A great deal must depend on the
nature of the transaction. On the other hand, it is an established principle in both countries
to agree that the damages should be so much in the event of breach of agreement. The very
reason why the parties agreed to such a stipulation was that, sometimes, the nature of the
damage was such that proof would be extremely difficult, complex and expensive. If I wanted
an example of what might be done in this way, I need only refer to the argument of counsel
as to the measure of damage sustained by Spain through the withholding of these vessels.
Suppose there had been no agreement in the contract as to damages, and the Spanish govern-
ment had to prove damages in the ordinary way, imagine the kind of cross-examination of
every person connected with the Spanish administration. It is very obvious that what was
intended by inserting these damages in the contract was to avoid a minute, difficult and
complex system of examination which would be necessary if they had attempted to prove
damage in the ordinary way.
It was also suggested that there could be no measure of damage in the case of a warship
which had no commercial value at all. It is a strange and somewhat bold assertion to say that,
in the case of a commercial ship, the damages could be easily ascertained, but that the same
principle could not be applied to a warship as it earned nothing. The deprivation of a nation
of its warships might mean very serious damage, although it might not be very easy to ascertain
the amount. But is that a reason for saying they were to have no damages at all? It seems to
me hopeless to advance such a contention. It is only necessary to state the assertion to show
how absurd it is.
But there was a more startling suggestion still. It was argued for the appellants that, if they
had acted up to their contract, and these vessels had been sent out at the specified date, they
would have shared the same fate as the other Spanish warships at the hands of the American
Navy. Therefore, the respondents, instead of suffering damage, had, by the action of the appel-
lants, been saved the loss of these ships, which otherwise would have been at the bottom of
the Atlantic. After considerable experience, I do not think that I have ever heard such an argu-
ment before, nor do I think that I am likely to hear it again. Nothing could be more absurd,
and to give effect to it would be a striking example of defective jurisprudence. If your Lordships
look at the nature of the transaction, it is hopeless to contend that the penalty was intended
merely to be
in terrorem
. Both parties recognised that the question was one in which time was
the main element of the contract. I have come to the conclusion that the judgment of the
court below was perfectly right. There is no ground for the contention that the sum in the
contract was not the damages agreed on between the parties for very good and excellent
reasons at the time at which the contract was entered into.
