Kemble v. Farren

Nature of the Case

This case involved a liquidated damages issue in the context of a contract to perform in a theater.

Facts

Farren (D) was hired by Kemble (P) to perform as a comedian at the Theater Royal. The contract contained a liquidated damages clause providing that if either party breached the agreement they would pay 1000 pounds to the other party.

Kemble brought suit alleging that Farren breached the contract in the second season. The jury awarded Kemble 750 pounds and Kemble appealed in an attempt to recover the full 1000 pounds according to the contract.

Issue

Are liquidated damages clauses that serve as a penalty valid?

Holding and Rule of Law

No. A liquidated damages clause is not valid if it is a penalty clause.

The stipulation that the clause is not a penalty clause cannot be sustained by the facts. Under the contract and from the very instance of its creation, if Kemble had neglected to make a singe daily payment, or if Farren had refused to conform to any usual regulation of the theater, however minute or unimportant, the contract called for the imposition of a 1,000 pound payment. That is a penalty and despite what the parties have agreed to it cannot be enforced.

Disposition

Dismissed.