Wilt v. Waterfield
273 S.W.2d 290 (Mo.1954).
Facts: The defendant contracted to sell his farm to the plaintiffs for $19,000. The plaintiffs paid $1,900 down. The defendant breached and sold the farm to a third party. At trial, the plaintiffs won damages of $7,000. The defendant appealed, arguing that the plaintiffs’ recovery was limited by a contract clause that fixed damages for breach at 10% of the purchase price.
Issue: Did the damages clause constitute a penalty?
Rule: If a contract contains stipulations of varying degrees of importance that would cause harm with varying degrees of certainty, a fixed damages clause will be taken to be a penalty and thus unenforceable.
Analysis: The court finds that the damages that would have resulted from the defendant failing to perform any of the various duties in the contract would be grossly out of proportion to the damages fixed in the contract. Thus, the stipulated amount in the contract is ruled to constitute a penalty.
Conclusion: The court upheld the verdict for the plaintiffs.