Mathews versus Sharp

Supreme Court of Pennsylvania1882-02-27

99 Pa. 560

Summary · law.co

Holding. The judgment is affirmed. The stipulated forfeiture of five hundred dollars in the real estate contract between Mathews and Sharp constitutes enforceable liquidated damages, not an unenforceable penalty, and Mathews remains liable for that amount upon his failure to convey the property.

Mathews and Sharp entered into a real estate contract requiring Mathews to convey land within twenty days while Sharp paid the purchase price. The contract specified that if either party failed to perform, that party would forfeit five hundred dollars to the other. When Mathews defaulted, Sharp sought to recover the forfeiture amount. Mathews challenged this, arguing the sum should be treated as an unenforceable penalty rather than liquidated damages.

The court rejected Mathews's defense of undue influence, finding insufficient factual allegations to support it. On the forfeiture question, the court applied the framework established in Streeper v. Williams, examining the contract's language, the relationship between the stipulated sum and the land's value, the difficulty of measuring actual damages, and the probable consequences of breach. The court determined that the mutual five-hundred-dollar forfeiture constituted a valid liquidated damages provision rather than a penalty, as the amount was reasonable in proportion to the transaction and the difficulty of proving actual loss.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether undue influence was adequately alleged to void the contract
Whether a stipulated forfeiture in a real estate sales contract constitutes liquidated damages or an unenforceable penalty
Proper factors for distinguishing between penalties and liquidated damages clauses

Procedural posture

The court affirmed the judgment of the lower court, which had awarded Sharp the stipulated forfeiture amount of five hundred dollars for Mathews's breach of the real estate sales contract.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Mr. Justice Trunkey

delivered the opinion of the court, February 27th 1882.

The alleged undue influence is not sustained by a statement of what Sharp said and did, nor is it averred that he even knew that Mathews was suffering the effects of intoxication. Nothing appears which could have imposed upon a nervous and excitable man. When a defence of this nature is set up, unless the facts upon which it is founded are given, the affidavit is insufficient. It is -as essential to show the acts resulting in undue influence as it would be, if fraud w$re alleged, to show in what it consisted.

In the argument it was conceded that the refusal of a vendor’s wife to execute the deed would not relieve him from all damages for breach of his contract to convey. The question is, whether Mathews made a valid agreement for payment of liquidated damages in ease of his default.

By the contract, within twenty days after its date, Mathews was to convey the land and Sharp was to pay the purchase money. Five hundred dollars were paid in hand, which Mathews was to hold as a forfeit in case Sharp failed to comply on his part. Mathews covenanted to return said five hundred dollars, “ and also to forfeit the sum of five hundred dollars to the said Joseph "W. Sharp, in case of his neglect to convey the property as agreed.” It is impossible to misunderstand just what the parties meant. They mutually agreed that if either should fail to beep his covenant, he should forfeit and pay to the other the sum of five hundred dollars. The very point was decided in Streeper v. Williams, 48 Pa. St. 450. There, the agreement was for sale of real estate and contained this stipulation : “ The parties to the above agreement doth severally agree to forfeit the sum of $500, say five hundred dollars, in case either party fail to comply with the terms of this agreement.” The word “ forfeit ” was held to mean “to pay” and although the jury found the actual damages were $50, one-tenth the stipulated sum, the court, upon the point reserved, “ whether the defendant was liable for the penalty or only for the actual damages,” rendered judgment for the penalty. In an elaborate opinion, it was ruled that to determine whether the sum named as a forfeiture for non-compliance is intended as a penalty, or as liquidated damages, it is necessary to look at the whole contract, its subject-matter, the ease or difficulty in measuring the breach in damages, and the magnitude of the stipulated sum, not only as compared with the value of the subject of the contract but in proportion to the probable consequences of the breach. This case differs in some minor details, but it would be difficult to find two cases with greater similarity in their main features. They are alike in that the stipulated sum to be paid in case of non-compliance is mutual, that with reference to the value of the land or amount of purchase money, said sum is too small to be minatory, and not so large, with reference to the probable consequences of breach, as to be unconscionable, and in the difficulty of proving actual damages. The court below followed the authority of Streeper v. Williams.

Judgment affirmed.