## Facts

- A theatre manager contracted with an actor to perform as principal comedian at Covent Garden Theatre for four seasons beginning October 1828 and to follow theatre regulations.
- The manager agreed to pay the actor a nightly fee for each night the theatre was open and to provide one benefit night each season on specified terms.
- The contract stated that if either party neglected or refused to perform the agreement “or any part thereof, or any stipulation,” the breaching party would pay £1,000, which the contract declared to be “liquidated and ascertained damages, and not a penalty.”
- During the second season, the actor refused to perform.
- The manager sued in assumpsit to recover the £1,000 specified in the clause.
- The jury returned a verdict for the manager for £750, subject to possible increase if the court treated the £1,000 clause as enforceable liquidated damages.
- The manager sought to raise the verdict to £1,000; the actor opposed, arguing the clause was an unenforceable penalty.

## Issues

1. Whether a clause fixing £1,000 payable upon any breach of a contract containing multiple stipulations of varying importance is enforceable as liquidated damages or must be treated as a penalty.
2. Whether express contractual language labeling the sum “liquidated damages” and “not a penalty” controls the court’s characterization of the clause.

## Decision

- The court held the £1,000 provision was a penalty, not liquidated damages, because it applied indiscriminately to breaches of any part of the agreement, including minor or readily measurable breaches.
- The court refused to increase the jury’s £750 verdict to £1,000 and left damages to the jury’s assessment of actual loss.
- The court stated that, where an agreement contains several stipulations of unequal importance, a general fixed-sum clause triggered by any violation will not be enforced as liquidated damages, regardless of strong labeling.
- The court recognized that fixed-sum damages can be valid when confined to specified breaches, particularly where losses are uncertain and difficult to quantify.

## Legal Principles

- Courts classify a fixed-sum breach payment by substance, not by the parties’ label; calling a sum “liquidated damages” does not prevent a finding that it is a penalty.
- A single fixed sum payable upon any breach of a multi-stipulation contract, including trivial breaches or breaches with easily measured damages, is treated as a penalty and is not recoverable as stipulated damages.
- Liquidated damages are more likely enforceable when the clause is limited to particular breaches and addresses losses that are uncertain in nature or amount.
- When a stipulated sum is disproportionate to likely loss for at least some breaches within its scope, courts award actual damages rather than enforce the fixed sum.

## Conclusion

The court declined to enforce a broadly drafted £1,000 “liquidated damages” clause because it attached the same large sum to any breach of a contract containing multiple obligations, making it penal in operation; the plaintiff could recover only the damages the jury found were actually sustained.


Kemble v. Farren, 6 Bing. 141 (C.P. 1829)