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 I^iCTURE 
 
 ON THE 
 
 LjaW OF COWTKACTS 
 
 BY 
 
 JOHN MASON itO» 
 
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 KF 801. B87 
 
 A lecture on the law of contracts, dellve 
 
 3 1924 018 805 907 
 
Cornell University 
 Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924018805907 
 
A LECTURE 
 
 ON 
 
 The Law of Contracts 
 
 Delivered before the 
 
 Association of American Government 
 Accountants 
 
 BY 
 
 JOHN MASON BROWN, LL B. 
 
 Law Clerk, Office of the Comptroller of the United States Treasury 
 S FEBRUARY 7th, 1907 
 
 480S8 
 
i>,jj'-,K,fc.:nr, 1607 
 
 BY 
 
 BAZiTZMOUE: 
 KOHK & FOUOCK. INC. 
 
 1907 
 
PREFACE. 
 
 The subject-matter here presented was prepared and 
 delivered by me before the Association of American 
 Government Accountants, with the sole aim and hope of 
 correcting some of the misconceptions of law which exist 
 in the minds of employes of the Government. It pretends 
 in no sense to be an exhaustive discussion of so important 
 and complex a subject as the Law of Contracts ; on the con- 
 trary, the object of the paper was only to present in con- 
 densed form and in proper sequence some of the essen- 
 tials of the subject, and, if possible, to lighten the burden 
 and clarify somewhat the doubts of Government employes 
 who have to deal either directly or indirectly with con- 
 tracts, but who have not had legal training and expe- 
 rience. 
 
 When preparing the paper, it was neither my idea nor 
 intention to publish it. But since, in the Judgment of 
 some of our most esteemed and responsible officials, it 
 was believed that it would prove a useful tool in the hands 
 of the contracting officers and auditing forces of the 
 Government, it is here reproduced as delivered. 
 
 To my fellow-servants, therefore, I beg to dedicate 
 these pages, earnestly hoping that they may serve the 
 purpose for which intended. 
 
 J. M. B. 
 
 May 10, 1907. 
 
Mr. President and Gentlemen of the Association: 
 
 Conscious, as I am, of my own limitations and of 
 the magnitude and importance of the subject which has 
 been assigned to me for discussion this evening, I con- 
 fess that it is not without hesitation and misgivings that 
 I am here to address you upon the law of contracts — a 
 topic which has ever been, and which shall, perhaps, ever 
 be, one of the most puzzling and important of those with 
 which our legislatures and our judiciary have had to deal. 
 
 From the time of Blackstone, almost each decade has 
 witnessed the production of one or more works upon the 
 law of contracts. Legislatures have passed many laws 
 relative to the contractual relations of citizens; and the 
 courts have rendered countless decisions as to the rights 
 of contracting parties, and as to the construction to be 
 placed upon their agreements. 
 
 Yet, despite the fact that the master minds of both 
 English and American jurisprudence have for many 
 years been devoted to the study and discussion of the law 
 of contracts ; despite the fact that many important points 
 still remain unsettled in the minds of the courts, your 
 President and Committee on Lectures have assigned to 
 me the task of discussing "the whole law of contracts" 
 within a very limited number of minutes ! Can you won- 
 der, therefore, that the enormity of my task should cause 
 the misgivings to which I have referred? 
 
 Some years ago, a very learned student, a professor 
 of Greek, died in Germany at the advanced age of ninety- 
 three. His son, who was then seventy-one years of age, 
 and his grandson, then fifty years of age, were Ukewise 
 Greek professors and profound students. Upon his death- 
 bed, the old man called them to him and said : "My sons, 
 my life is wasted and I am a failure ; but I would have it 
 
otherwise with you. I have attempted too much. I have 
 spent the whole of my life in the study and investigation 
 of the definite article and its use. The task was too 
 great, however, and I therefore urge each of you to con- 
 fine your efforts and study to the genitive or possessive 
 case of said article." 
 
 Upon the same theory, gentlemen, I should have felt 
 more hopeful of helping you, if, instead of attempting to 
 cover "the whole field of contract law," I had been al- 
 lowed to confine my attention to one of its many branches 
 or ramifications. 
 
 It is my purpose, this evening, to state, and in some 
 cases briefly explain, the elementary principles of the law 
 of contracts, laying emphasis upon those which must ex- 
 ist in an enforceable contract, and pointing out to you 
 some of the things which are to be avoided. And, in the 
 hope that I may be able to help you in the discharge of 
 your official duties, I shall mainly deal with those points 
 which are present in, and material to, government con- 
 tracts. 
 
 To those of you who have studied law, or practiced 
 law, or had experience in its application and philosophy, 
 I fear that many of the elementary principles which I 
 shall state will seem tiresome platitudes. But I beg you 
 to bear in mind the fact that many of those who are here 
 with you have not been, and are not, students of the law, 
 and that a detailed explanation of the essentials of a con- 
 tract is, therefore, a necessity to them in order that they 
 may intelligently grasp the distinctions which may have 
 to be drawn in a settlement under a contract, and cor- 
 rectly determine the rights or liabilities of the parties 
 thereto. 
 
 At the outset, let me impress this fact upon you: 
 When the United States Government enters into a con- 
 tract with any of its citizens it stands on identically the 
 same footing as an individual, and is, therefore, subject 
 to the same obligations and invested with the same rights 
 as exist against or in favor of any citizen. 
 Bostwick vs. United States, 94 U. S. 53. 
 Smoot's case, 15 Wallace (U. S.) 36. 
 
Definition. 
 
 In the case of Sturges vs. Crowninshield, 4 Wheaton 
 (U. S.) 122 et seq.. Mr. Chief Justice Marshall thus de- 
 fined a contract: 
 
 "A contract is an agreement in which a party 
 undertakes to do or not to do a particular 
 thing." 
 Hundreds of other definitions of a contract have been 
 given by the various text-writers and by the courts ; but, 
 to my mind, and for our purposes, the above definition 
 will suffice. And if change is to be made in the language 
 of that distinguished jurist, the following suggestion has 
 been offered : 
 
 "A contract is an agreement in which each party 
 undertakes to do or not to do a particular 
 thing." 
 The reason for this, you will see later on. 
 
 Contracts Must Not Be Unilateral. 
 
 By the same reasoning which in law prohibits a man 
 from suing himself, it is equally well established that a 
 man cannot enter into any contract or obligation with 
 himself of such nature as to be enforceable in law. 
 
 It follows, therefore, that to each anjiUevery enforce- 
 able contract or agreement, there must be at least two 
 parties. 
 
 Qualifications of Contracting Parties. 
 
 When two or more parties desire to enter into a con- 
 tractual relationship, each and every one of them should 
 possess all of the following qualifications: 
 
Sound Mind. That is, he must be capable of giving 
 or refusing assent to the proposed agreement or 
 obligation with full realization and appreciation 
 of the proposed act and its consequences. 
 
 Lawful Age. That is, he must be of at least such 
 age as the law requires to have been reached by- 
 persons before they may become parties to a con- 
 tract which will be enforceable in law. 
 
 No Legal Disability. That is, he must not be under 
 any such disability as will in the eye of the law 
 render the contract void. (Meeks vs. Vassault, 
 16 Fed. Rep. 1314.) 
 
 Parties to Govemment Contracts. 
 
 When contracts are entered into for, and on behalf of, 
 the United States, by some officer or agent thereof, the 
 contract should so recite. 
 
 For example : A contract made by John Jones, a quar- 
 termaster of the army, should contain some such state- 
 ment as this : — "This contract made and entered into by 
 and between Captain John Jones, Quartermaster, U. S. 
 Army, for and on behalf of the United States of America, 
 party of the first part," etc. 
 
 In other words, the contract should plainly show that 
 it is not the contract of John Jones in his individual ca- 
 pacity, but that it is made by him for, and on behalf of, 
 the United States, as its agent. In like manner, though 
 it is not essential, I would suggest and recommend that 
 it should be so signed by him. 
 
 When the government contracts with an individual, 
 that individual should sign the contract; or, if someone 
 holding proper and valid power of attorney sign the 
 same for him, that power of attorney should be attached 
 to the contract as evidence for the accounting officers. 
 
 If the government contracts with a firm or a partner- 
 ship, (not a corporation), the full names of those com- 
 
 8 
 
prising the firm or partnership should be stated in the 
 body of the contract, and the contract should be signed 
 with the firm name by one of the partners with the added 
 words "a member of the firm." 
 
 If the government contracts with a corporation, the 
 contract should state the legal name of the corporation, 
 and should designate the State under whose laws the 
 same is incorporated, together with the location of its 
 headquarters or cnief office. Such a contract should be 
 signed with the corporate name by some officer or agent 
 thereof in his official capacity, and documentary evidence 
 of his right to so sign the contract should be required of 
 him and should be attached to the contract. 
 
 Kinds of Contracts. 
 
 Though a few of the text-writers no longer follow the 
 division of contracts as made by Blackstone, but directly 
 treat and consider the various forms of contracts, I do 
 not conceive their treatment or explanation to be any the 
 clearer. And since, as a matter of fact, the division made 
 by Blackstone is still recognized as correct, I shall follow 
 it here. 
 
 Contracts are of two kinds: 
 
 1. Express Contracts. 
 
 2. Implied Contracts. 
 
 While I have stated that contracts are of two hinds, 
 each of those kinds of contracts may exist in many forms. 
 It is essential, therefore, that we should not confuse the 
 use of the words "kinds" and "forms." 
 An Express Contract is an agreement or undertaking 
 wherein the obligations of each party thereto are 
 stated at the time of the making. 
 An Implied Contract is such as reason and justice 
 dictate, and which, therefore, the law presumes 
 that every man undertakes to perform. 
 
 i 
 
Let me illustrate for you, that you may grasp them the 
 better. If I call a cab and after conversation with the 
 owner agree that I shall hire it for a pleasure drive of 
 three hours, and agree to pay him therefor at the rate of 
 two dollars an hour, an express contract is thus created 
 between us. The undertaking of each party is fully 
 stated and avowed at the time of the making; the cabman 
 is obligated to furnish the cab service in question, and I, 
 in turn, am obligated to pay for it at the fixed and de- 
 termined rate. 
 
 It is immaterial whether the contract be verbal or in 
 writing, to create an express contract. In either event, 
 it is sufficient to create an express contract if the obliga- 
 tion of each party be plainly stated at the time of making. 
 
 But if, on the other hand, without making terms of 
 any kind with the owner or driver, I merely call a cab, 
 enter it, and enjoy the use thereof for a drive, the law 
 presumes that I undertook and agreed to pay a fair and 
 reasonable rate or price for the service, and it therefore 
 creates against me an implied contract to that effect. 
 
 Proposal and Acceptance. 
 
 The existence of a contractual relation between two 
 or more parties, or sets of parties, represents a proposal 
 or offer made by the one party, and acceptance thereof 
 by the other. Every contract is based upon "mutual as- 
 sent," or, as many authorities express it, "a meeting of 
 the minds." 
 
 The element of mutual assent, or the meeting of the 
 minds, is absolutely essential to the creation of a contrac- 
 tual relation. An offer or a promise by one person to 
 another, but not accepted as made, involves no concur- 
 rence of the minds, and hence can never constitute a 
 contract. 
 
 See Tilley vs. Chicago, 103 U. S. 155. 
 
 10 
 
For example, if I say to you, "I will pay you four dol- 
 lars a day for three days' use of your boat." You reply, 
 "I will accept your proposition, provided you pay the 
 wages of the engineer during that time." Manifestly, 
 there is no contractual relationship here; for, in your 
 reply, you have imposed a new condition, not contained in 
 my offer, and the transaction up to this point represents 
 no meeting of the minds. 
 
 If, however, I reply to you, "I will stand by my previous 
 offer and will also pay the engineer's wages as you re- 
 quire," then the meeting of the minds is complete and 
 an enforceable contract subsists between us. 
 
 A proposal or an offer may be made verbally, or by 
 letter, or by telegram, or by advertising and posting 
 thereof. 
 
 It is of the utmost importance that it should definitely 
 and specifically express the offer of the proposer and the 
 conditions imposed by him in connection therewith. 
 
 The acceptance of a proposal may be made verbally, 
 or by letter, or by telegram, or by overt act. This latter 
 method alone requires illustration. 
 
 If a person, or a public official acting under authority, 
 offers a reward to any person who will make a particular 
 arrest, or give information leading to it, any person who 
 makes the arrest or gives the desired information prior 
 to the withdrawal of the offer may recover the reward. 
 For there exists a contract entered into and executed by 
 itself. Such an offer, however, like any other proposal, 
 may be withdrawn before acceptance. And if both the 
 offer of reward and the withdrawal thereof were by pub- 
 lic advertisement or posting, actual notice of such with- 
 drawal is not necessary to debar one claiming the reward. 
 See Shuey vs. United States, 92 U. S. 73. 
 
 Ordinarily, as you know, the government publishes and 
 issues printed specifications relative to the work it desires 
 to have done. In these specifications, as a rule, are set 
 forth at considerable length the various conditions and 
 terms which will be imposed upon the successful bidder. 
 Of course, a bidder does not have to accept all of those 
 conditions and terms; he may make his bid on very dif- 
 
 11 
 
ferent conditions; for the person to whom the bid is 
 addressed may very properly refuse to consider a proposal 
 thus made. Usually, however, the bids of the persons 
 offering to perform the required service, or furnish the 
 desired materials, are based upon these specifications. 
 And, since this is true, you will readily see my reason for 
 laying decided emphasis upon this point : that, those who 
 invite proposals or bids should state with the utmost pre- 
 cision and clearness just what they want done and how 
 they want it done. 
 
 In your official capacities, perhaps some of you, Hke 
 myself, have handled cases wherein the contractor com- 
 plained and sought relief on the ground that he did not 
 know that the contract or the specifications contained a 
 certain provision which subsequently operated to his dis- 
 advantage; or where a condition, awkwardly and clum- 
 sily expressed, was subsequently construed against him 
 to mean something other than that which he had con- 
 ceived it to mean when he was preparing his proposal. 
 
 Of the effect of the language used in a proposal and in 
 a contract, I shall hereafter speak, under the subdivision, 
 "Interpretation." For the present, suffice it to say, that 
 such a disagreeable situation should be insured against. 
 Those charged with the preparation of specifications 
 should exercise the greatest care to plainly and clearly 
 state what they want done, and the conditions or terms 
 which they impose in regard thereto. Those charged with 
 the preparation of contracts should exercise the same de- 
 gree of care to the same effect; and, if the specifications 
 are referred to and made a part of the contract, care 
 should be had that no conflict should exist between the 
 provisions of the contract and those of the specifications. 
 
 In this connection, I would suggest that the sepcifica- 
 tions for work, or supplies, desired by the government, 
 should be printed in full and bold type; that every con- 
 dition which will be imposed in regard thereto be fully 
 stated with the utmost clearness; and that at the end 
 thereof, as a part thereof, should be a printed form to be 
 filled up by the bidder, wherein he should state the price 
 for which he will furnish the work, or supplies, desired ; 
 
 12 
 
that his bid is made with full knowledge of the terms and 
 conditions imposed, and that he consents that the same 
 be incorporated into his contract if the same be awarded 
 to him. 
 
 Under this method, both the wants of the government 
 and the proposal of the bidder are, or should be, free 
 from ambiguity; and it would only remain to frame the 
 contract in strict accordance therewith and to execute 
 the same as required by law. 
 
 To Sum Up : A Proposal should be intended to effect 
 legal rights, and to accomplish only legal ends; it 
 should be free from all uncertainty or ambiguity; 
 it should be clear, certain and definite in stating 
 the offer made; and, it should not be dependent 
 upon a condition which in fact reserves an un- 
 limited option to the proposer. 
 The same elements, from the standpoint of the acceptor, 
 are essential to a valid and enforceable acceptance. 
 
 Consideration. 
 
 For every valid and enforceable contract obligation, it is 
 absolutely necessary and essential that there shall exist 
 a "consideration." 
 
 In morals and in the moral law, no consideration is 
 necessary or required to render a promise binding; for 
 the moral law and higher ethics brand it a sin or wrong 
 to excite one's hopes by a promise and to then fail to 
 fulfil such promise. In such a manner a confiding or 
 credulous person might easily become financially or com- 
 mercially ruined through assuming obligations on the 
 strength of a promise, but which upon its breach he could 
 not meet. 
 
 On such grounds the law declines to enforce an under- 
 taking entered into without a valid consideration there- 
 for. By so doing, however, it does not sanction the viola- 
 tion of the moral obligation, or the breach of faith, but 
 
 13 
 
it simply says that it will not take jurisdiction to rectify 
 a moral wrong. But if there has passed an adequate con- 
 sideration for the promise, and if such promise be valid, 
 then the law does take jurisdiction to remedy the legal 
 wrong which may have been sustained through the breach. 
 
 In other words, the giving of an adequate consideration 
 creates a legal right, enforceable in law; the failure to 
 give such a consideration leaves only a moral right over 
 which the courts take no jurisdiction. 
 
 "Consideration," in contract law, has been variously 
 defined. I will not presume to offer a conclusive defini- 
 tion. I shall endeavor only to state a few of the essential 
 elements thereof, and to light your path to original 
 thought and investigation. 
 
 Consideration ordinarily implies the giving of some- 
 thing for something — quid pro quo. Theoretically and 
 in principle the consideration is supposed to represent a 
 value equal to that represented by the promise of the 
 other party. But in application and practice, I fear that 
 this principle and theory is often a myth and a fiction. 
 The Millenium has not yet dawned, and in these days of 
 industrial and financial competition we are more accus- 
 tomed, perhaps, to think of a contract as the consumma- 
 tion of a deal wherein each party seeks to secure for him- 
 self the greatest possible benefit in return for the least 
 possible outlay or concession on his part. 
 
 I deem it unnecessary to devote any part of the limited 
 time assigned me to the discussion of forms of contracts 
 other than those with which you may have to do. I shall, 
 therefore, pass over the subject of "Specialty" contracts, 
 and the discussion of "love and affection" as a considera- 
 tion for a promise. For I dare say that you will have 
 little practical experience with cases wherein either a 
 citizen or corporation spurns the tender of government 
 funds as compensation for his goods or his services, even 
 if the law did not prohibit the acceptance of voluntary 
 service. (See 33 Stat. L, 1257.) 
 
 Since, as I have stated, the law regards consideration 
 as essential to an enforceable contract and to the creation 
 of legal rights thereunder, so, in turn, the law requires 
 
 14 
 
that the consideration shall have a legal value. Ordi- 
 narily, and in most cases, consideration for a promise 
 is expressed in money value ; for money has an admittedly 
 legal value. 
 
 The consideration, however, may be of various kinds, 
 and the following are a few examples of those which the 
 courts have held to be sufficient: 
 
 1. The waiver or transfer of any legal or equitable 
 right. 
 
 2. Forbearance for a certain or indefinite time to in- 
 stitute suit upon a valid legal claim, (See Good- 
 man vs. Simonds, 20 Howard, U. S., p. 343) . 
 
 3. The prevention of litigation. (For the law sanc- 
 tions and favors the settlement of disputes). 
 
 4. Abandonment of contemplated litigation concerning 
 
 a question of law, which, by reason of its nature, 
 might affect the rights of either party. 
 
 5. Mutual promises made at the same time. (These 
 are called concurrent promises, and will support 
 each other if both be legal and binding). 
 
 6. Marriage. (Though not so in former times, mar- 
 riage is now recognized and held to be a considera- 
 tion of the highest and most sufficient value for a 
 promise. (See Magniac vs. Thomson, 7 Peters, 
 U. S., 348; and, Prewit vs. Wilson, 103 U. S., 22). 
 
 The foregoing are only a few of the many illustrations 
 which might be given in this connection, but they fully 
 warrant the conclusion that the obligation of each party 
 is to be regarded as the consideration for the promise or 
 undertaking by the other party. And, bearing this in 
 mind, we might further conclude that consideration rep- 
 resents the act or forbearance, or the promise thereof, 
 offered by one party to a contract, and accepted by the 
 other party as the inducement or quid pro quo for the act 
 or promise of the latter party. 
 
 The consideration for a contract must be a legal one. A 
 contract cannot be founded upon an illegal consideration. 
 Violation of law, or of morality, or of decency, or of 
 public policy, are in contravention of the common law, 
 the maxim of which is, "Ex turpi contractu non oritur 
 
 15 
 
actio." Nor does an enforceable contract exist if the 
 same is founded upon an impossible consideration. "Lex 
 neminem cogit ad vana aut impossihilia." 
 
 Much has been said and written on the question of 
 what constitutes an adequate consideration. It is need- 
 less to here review the various phases of that discussion. 
 Suffice it to say that the great burden of English cases 
 hold that the intrinsic value of the consideration is not 
 vital to its adequacy. And the Supreme Court of the 
 United States has held that a dollar is sufficient con- 
 sideration for any promise, except one to absolutely pay 
 a larger sum of money. 
 
 See Lawrence vs. McAlmont, 2 Howard (U. S.) 426, 
 
 Discharge. 
 
 A contract is said to be discharged when the legal rela- 
 tions which it created have ceased to exist. 
 
 Discharge of a contract may be effected in the follow- 
 ing ways: 
 
 1. By performance. 
 
 2. By mutual assent. 
 
 3. By impossibility of performance. 
 
 4. By breach. 
 
 These methods of discharge, together with their sub- 
 divisions, I shall take up in the order named. 
 
 1. By PerpormaStce. 
 
 In order that performance may work a discharge, both 
 parties to the contract must have done all that the con- 
 tract required them to do. When one party has per- 
 formed his part of the agreement he is free from further 
 liabihty thereunder. But the contract is not discharged 
 by performance until the other party also has performed 
 his promise or undertaking. This statement, I need 
 hardly say, relates to contracts wherein the undertaking 
 of each party is absolute. 
 
 16 
 
The parties to a contract may, however, very properly 
 introduce into the body of their agreement a stipulation 
 that the said contract shall terminate and be discharged 
 upon the performance of some certain condition or upon 
 the occurrence of some particular event. 
 
 2. By Mutual Assent. 
 
 An executory contract, (that is, one which has not yet 
 been acted upon), may be discharged by mutual assent. 
 "Mutual assent," as here used means the agreement of 
 the several parties to a contract that it shall no longer 
 bind them. 
 
 The principle of consideration underlies this doctrine. 
 We have already seen that every contract, to be valid, 
 represents a consideration from each party to the other 
 party. In the discharge of a contract by mutual assent, 
 the consideration of each party to the other party is the 
 renunciation of his further rights under the contract. 
 And it follows that each party must so renounce his con- 
 tract rights ; for, if only one party makes such renuncia- 
 tion, the discharge would be incomplete since in such 
 case there would be lacking the element of mutuality of 
 consideration. 
 
 The principle of discharge by mutual assent, however, 
 does not apply to executed contracts. It is now well 
 settled that when a contract has become executed, either 
 wholly or in part, by the passage of a consideration, such 
 contract can thereafter become discharged only by per- 
 formance, or by release under seal, or by accord and 
 satisfaction, or by impossibility of performance, or by 
 breach. 
 
 Confining our attention, therefore, to executory con- 
 tracts, it follows that the parties may discharge the con- 
 tract through the partial or total release of each other 
 from further obligation thereunder. 
 
 For example: Suppose I have a contract with you 
 whereby you bind yourself to furnish me a million bricks 
 at the rate of fifty thousand per week, for which I agree 
 to pay at the rate of twelve dollars per thousand as they 
 are delivered. Your deliveries and my payments are 
 
 17 
 
faithfully carried on for a period of ten weeks, for in- 
 stance. The contract is still executory as to one-half, and 
 we may very properly and legally agree that either no 
 more, or only a few more, deliveries shall be made under 
 the contract. Such a release may be either partial or 
 total as to the future deliveries. And the element of 
 mutuality is surely existant, since you release me from 
 further payments under the contract, and I, in turn, re- 
 lease you from further deliveries thereunder. 
 
 Still another subdivision of this "discharge by mutual 
 assent" should be mentioned. I refer to the making of 
 a new contract on the same subject-matter, wherein the 
 provisions are either wholly or partially inconsistent with 
 the terms of the former contract. In such case the later 
 contract pro tanto discharges the former contract and 
 the provisions of the later contract prevail. 
 
 3. By Impossibility op Performance. 
 
 A contract may be impossible of performance at the 
 time when it was entered into, or it may become impossi- 
 ble of performance through events occurring subsequent 
 to its making. 
 
 A contract to do a certain thing which both parties to 
 the contract, at the time of its making, knew to be physi- 
 cally impossible of performance imposes upon neither of 
 them an enforceable obligation. And a contract to do a 
 thing which is legally impossibly is void, and, conse- 
 quently, unenforceable. 
 
 A contract founded upon the supposition and belief by 
 both parties thereto that a certain thing is in existence, 
 when in fact it later develops that the thing never did 
 exist, or had ceased to exist at the time when the contract 
 was made, is void. 
 
 Gibson vs. Pelkie, 37 Mich. 380. 
 
 Franklin vs. Long, 7 Gill & John. (Md.), 407. 
 
 Many of you have had personal experience, perhaps, 
 with cases wherein a contractor with the government, 
 despite the fact that his undertaking was absolute in its 
 terms, has sought to be relieved from liability under the 
 provisions of his contract, on the ground that the failure 
 
 18 
 
to comply with its provisions was due to no fault on his 
 part, and that in one or more ways it became impossible 
 for him to perform his contract as stipulated. 
 
 Let us stop a moment to consider some of the excuses 
 which are frequently poured into our ears, and weigh 
 their merit. 
 
 The vast weight of modern authorities sustains the 
 statement that, in the absence of a stipulation to the con- 
 trary, non-performance of a contract, if directly caused 
 by "Act of God," is excused. 
 
 By the term "Act of God" is meant some manifestation 
 of nature to which man has not contributed, and which 
 he can neither control nor overcome, such as, earthquakes, 
 tempests, cloud-bursts, lightning and the fire it kindles, 
 blizzards, or hurricanes. 
 
 It is perfectly legal and proper for contracting parties 
 to stipulate in their agreement for excuse from non- 
 performance due to, or caused by, facts or conditions 
 other than the "Act of God." But if, in view of their right 
 and power, they fail to protect themselves by such stipu- 
 lations, the subsequent occurrence of those conditions will 
 not excuse the breach. 
 
 I shall mention only two cases as illustrative of the 
 foregoing principle. 
 
 In Volume 6 of the Decisions of the Comptroller of the 
 Treasury, page 74-8 et seq., the contractor agreed to build 
 a steam tugboat in accordance with the requirements and 
 specifications of the government. One of the provisions 
 of the specifications was that the engine to be installed 
 in said tugboat should be of a particular type made by the 
 Wells Engineering Company. The contractor was un- 
 able to complete the tugboat by the date stipulated, and 
 sought to be relieved from penalization under the con- 
 tract on the ground that the sub-contractor, designated by 
 the government, failed to furnish the engine on time, and 
 that until the engine was furnished it was impossible for 
 him to complete the contract. 
 
 In that case, however, following the authorities therein 
 cited, it was held that the failure of the sub-contractor 
 to furnish the engine, notwithstanding the fact that the 
 
 19 
 
said sub-contractor was designated by the government, 
 did not relieve the contractor from his contract liability 
 in case of delay. 
 
 In Volume 12 of the same Decisions, page 167 et seq., 
 you will also find a full discussion of this principle. With- 
 out stopping to state the facts and details of that case, I 
 will merely recite the various reasons or excuses which 
 were therein offered by the contractor and rejected by the 
 Comptroller as legally insufficient. 
 
 1. Failure by sub-contractor, on account of unusual 
 
 severity of weather, to furnish materials on time. 
 
 2. Labor strikes in the shops of a sub-contractor, 
 which delayed delivery of materials and patterns. 
 
 3. Labor strikes in the contractor's own shops. 
 
 4. Destruction by fire of the shops of the sub-con- 
 tractor, necessitating construction of new engines 
 and pumps. 
 
 Every one of these contingencies might, as above stated, 
 have been properly provided against in the body of the 
 contract. But in the absence of such provision the pre- 
 sumption exists that the parties to the contract did not 
 intend that they, or either of them, should justify or ex- 
 cuse non-performance. 
 
 Death of Party to Contract and its Effect. 
 
 In general, contracts are not affected by the death of 
 one of the parties thereto. For the executor or adminis- 
 trator of the decedent is ordinarily required to complete 
 the obligations of the decedent, and may enforce those 
 existing in his favor. In other words, the executor or 
 administrator, in most matters of contract, stands in the 
 same position as the decedent whom he represents. 
 
 While such is the general rule, there are exceptions to 
 it. And you will readily see the reasoning upon which 
 such exceptions are predicated, viz.: because death has 
 rendered the contract impossible of performance accord- 
 ing to the intention and desires of the parties. 
 
 20 
 
1. Contracts op Marriage. 
 
 It is to be assumed, and I shall therefore state it as a 
 fact, that when a man and a woman have reached that 
 beatific state of mutual absolution from all the failings, 
 sins, and shortcomings to which humans shall ever be 
 heirs; and when they have wandered far beyond the 
 boundaries of Platonic Friendship, and have agreed to 
 intermarry, such a promise or agreement has a distinct 
 foundation. In the absence of proof to the contrary, let 
 us assume that the woman has consented and contracted 
 to marry, not because it is a man; but because it is the 
 man. The same theory obtains on the part of the man. 
 Substitution of any other person would doubtless be most 
 repulsive to each of them. 
 
 Can it be argued, or imagined, that the executor or 
 executrix of those persons could fulfil the contract of 
 marriage? If such were true, you can readily imagine 
 the ludicrous and absurd complications which might en- 
 sue. 
 
 2. Contracts op Partnership. 
 
 Contracts of partnership are terminated and dis- 
 charged by death. For, by the same reasoning which has 
 sustained the termination of the marriage contract 
 through death of one of the contracting parties, the law 
 presumes that a man has the absolute right to select his 
 own business associates, since upon the honor, standing, 
 integrity, and congeniality of the latter, as well as his 
 business qualifications, may depend the safety of the for- 
 mer's business and fortune. 
 
 3. Contracts por Personal Services. 
 
 Contracts for the rendition of strictly personal services 
 are terminated by the death of the party who was to 
 render them. 
 
 For example: If you contract with a celebrated artist 
 to paint the portrait of your wife ; or, if you own a con- 
 cert hall and contract with some celebrated singer 
 or pianist of peculiar individual reputation to ap- 
 
 21 
 
pear there as the attraction; or, if you contract 
 with a certain surgeon to perform a certain opera- 
 tion upon you; or, if you contract for the services 
 of a certain lawyer to defend or prosecute a case 
 in which you are interested ; or, if you contract for strictly 
 personal services of almost whatever kind, the death of 
 the person with whom you have so contracted will ter- 
 minate the contractual relationship. His executor cannot 
 force you to accept the substituted services of some other 
 person; for the contract contemplated the rendition of 
 the services by the particular person named, and the law 
 reads into that contract the additional words "if he 
 lives." 
 
 In this connection I would refer you to Volume 7 of the 
 Decisions of the Comptroller of the Treasury, page i02, 
 and to Volume 10 of the same Decisions, page 26. 
 
 In the former case it was held that the contract for 
 the statue of General Sherman in this city was terminated 
 by the death of the sculptor prior to the completion there- 
 of, since the contract contemplated the rendition of ser- 
 vices involving peculiar artistic skill and ability. 
 
 In the latter case it was held that the death of a person 
 who had contracted to do certain surveying for the gov- 
 ernment was terminated by the death of said contractor 
 before completion of the work; and that neither the sure- 
 ties nor his estate was bound to complete the work, nor 
 was the government obliged to accept any substitution 
 for the personal skill of the decedent. 
 
 4. Contracts op Agency, 
 
 AND 
 
 5. Contracts for Power of Attorney. 
 
 It is unnecessary, in view of what has already been 
 said, to dwell at length upon the effect of death upon 
 these forms of contracts. For a moment's thought will 
 suffice to convince you that, except in rarest cases, death 
 should, and does, terminate the contractual relationship. 
 The principle of personal service so pervades them as to 
 bring each within the rules already announced. 
 
 22 
 
Breach of Contract. 
 
 I have already stated that a contract may be discharged 
 by breach. "Breach of Contract" means, ordinarily, the 
 violation of the promise contained in the agreement. 
 
 Breach of contract may occur in several ways : 
 
 1. Renunciation. 
 
 2. By rendering performance of its provisions im- 
 possible. 
 
 3. By either total or partial failure to perform that 
 which has been undertaken. 
 
 These forms of Breach, I will discuss in the order 
 named : 
 
 1. By Renunciation. 
 
 If, before the time arrives for the performance of 
 the promise or contract obligation, one of the parties 
 announces and gives notice of his intention not to fulfil 
 or perform his part of the contract, the other party may 
 at once consider and treat the contract as broken. The 
 party who gave the notice is said to have renounced his 
 contract, and the other party may at once, or later, ac- 
 cording to his preference, bring suit against the party 
 so defaulting. 
 
 The obligee or promisee, however, is not obliged to 
 treat the renunciation as a breach. He may, in his dis- 
 cretion, ignore it, or treat it as inoperative. But if he 
 elects to so treat it, he thereby keeps the contract and all 
 of its provisions alive for the benefit of the other party 
 as well as for himself, and the position of each party re- 
 mains as though no effort has been made at renunciation. 
 
 If the intention to renounce the contract is withdrawn 
 before the promisee has elected to declare a breach, the 
 latter thereupon loses his right to declare a breach ; and 
 the rights and positions of the parties remain just as 
 though no notice of renunciation had been given. 
 
 And so, in turn, if the promisee declines to accept or 
 treat the renunciation as a breach, and insists that the 
 
 23 
 
contract obligations continue in full force, the other party 
 is thereby enabled to take advantage of any supervening 
 circumstances which would justify him in refusing to 
 complete the contract. 
 
 2. By Rendering Performance of its Provisions 
 Impossible. 
 
 Just as the renunciation of a contract obligation before 
 due performance thereof may be considered a breach of 
 the contract, and entitle the injured party to immediately 
 bring suit, so, if either party by his own act makes the 
 performance of the contract obligation impossible, the 
 other party may at once institute suit against him for 
 the breach. 
 
 3. By Either Total or Partial Failure to Perform 
 That Which Has Been Undertaken. 
 
 A contract is broken when either of the parties thereto 
 fails to perform any of its terms or conditions. 
 
 When the promises of both parties, as evidenced by the 
 contract, are absolute and are independent of each other, 
 if one of the parties fails to perform that which he has 
 undertaken, the contract is broken and the innocent party 
 may institute suit against him for the breach. In such 
 a suit, and under such circumstances, it is unnecessary 
 that the innocent party should aver the performance of 
 his own promise. It is sufficient that he should aver the 
 existence of the contract and the breach thereof by the 
 other party. And to such an action it is not a good de- 
 fense by the party to allege that the plaintiff himself has 
 failed to perform his part of the contract. 
 
 See Long vs. Caffrey, 93 Pa. St. Rep., 526. 
 
 At this point, however, I should be remiss in my duty 
 if I failed to call your attention to an important phase of 
 Discharge by Breach. 
 
 24 
 
Vital or Trivial Breach. 
 
 If the breach be in a matter which may reasonably and 
 properly be construed as one which the parties ,to the 
 contract considered as vital or essential to its existence, 
 or which they have expressly made of material import- 
 ance, or of its essence, the breach of the contract in such 
 particular will discharge the promisee from the perform- 
 ance of his obligation. 
 
 See Spalding vs. Rosa, 71 N. Y. 40. 
 
 But when the breach is in a trivial matter, which under 
 all the circumstances of the case may be deemed to have 
 been considered by the parties as of minor or trivial im- 
 portance, not of the essence of the contract, and which 
 may be compensated for in damages, the party injured 
 is not thereby discharged from the further performance 
 of his obligations. He is bound to proceed with the per- 
 formance thereof as though the breach had not occurred, 
 and then, if he wishes, to seek his redress in an action 
 for damages thus sustained by him. 
 
 See English case, Bettini vs. Gye, L. R. 1 Q. B. 183. 
 
 Legal Rights and Remedies. 
 
 We have seen that a contract may be discharged by 
 Breach. Let us now go further and briefly consider the 
 effects of such breach. 
 
 That an adequate consideration has passed for the un- 
 dertaking creates, as I have shown you, a legal right in 
 favor of the promisee as against the promisor. In case 
 of breach, therefore, the courts will take jurisdiction, and 
 grant relief, either according to the law or according to 
 the stipulations of the contract. 
 
 We come, therefore, to the very important question of 
 the legal remedies which exist in favor of, and may be 
 invoked by, one party to a contract against the other 
 party who has been guilty of breach. 
 
 25 
 
1. Mandatory Injunction. 
 
 There are certain forms of contracts which the courts 
 will enforce by the issue of a mandatory injunction for 
 specific performance. This remedy, an extraordinary 
 equitable one, is granted only in that class of cases where- 
 in the law affords no adequate remedy, and wherein the 
 injury resulting from the breach is of such nature that 
 it cannot be measured, or compensated for, in damages. 
 
 For example : A railroad company, contemplating the 
 erection of a large freight depot and the establishment 
 of a vast freight yard in immediate proximity thereto 
 may need certain land adjacent to their own tract. They 
 enter into a contract with the owner whereby the latter 
 agrees to sell and convey his land for a certain sum. 
 Subsequently, he refuses to carry out his contract. The 
 acquisition of his land is necessary to the purposes of the 
 railroad. It may have purchased all of the other land 
 needed, and yet find it useless for its purposes until this 
 particular tract is acquired. Suppose that this particular 
 tract were in the center of, or surrounded by, the land 
 owned by the railroad company. Pecuniary damages in 
 this case will not afford an adequate remedy, and the 
 railroad may, therefore, invoke the aid of equity and pro- 
 cure a mandatory injunction compelling the owner of 
 the land to convey the property according to the terms 
 of his contract. 
 
 Such a procedure, however, is rare in the matter of 
 government contracts, and I need devote no further time 
 to its discussion here. 
 
 2. Damages. 
 
 The other form of relief to which a party becomes en- 
 titled upon breach of contract is called "Damages." 
 
 Definition. 
 
 By "damages" is meant the indemnity recoverable by 
 a person who has sustained an injury in his person, or in 
 
 26 
 
his property, or in his relative rights, through either the 
 act or default of another person. 
 
 With this definition in mind, let me state a few of the 
 universally recognized rules on this subject. They re- 
 quire nothing more than mention by me. 
 
 1. When an injury is done to a legal right of a per- 
 son, actual perceptible damage is not essential or indis- 
 pensable as the basis of his claim for damages. It is 
 sufficient to show the violation of the right, and the law 
 thereupon presumes some damage. 
 
 For example: Proof of a conspiracy or confederation 
 to circulate malicious, though not necessarily libelous or 
 actionable, words concerning a person, has been held 
 sufficient to entitle one to recover damages. (See 8 Pa. 
 St. Rep., 239) . 
 
 2. Proof of the violation of a legal right entitles the 
 party wronged to recover some damages. If no actual 
 damages appear to have resulted, then nominal damages 
 are awarded for the technical injury. 
 
 For example : If you sue out an attachment against a 
 person, and the sheriff, acting on your instructions, 
 levies the same on the property of the wrong person of 
 same name, you would be liable for damages, even though 
 they be merely nominal. 
 
 3. But where actual injury from the violation of a 
 right is proven, substantial damages may be given to the 
 injured party as compensation for the loss or injury sus- 
 tained. These are called compensatory damages. 
 
 Exemplary or Punitive Damages. 
 
 It is unnecessary that I should devote any time to the 
 discussion of exemplary, or punitive, or vindictive dam- 
 ages. 
 
 For in only one class of contracts are they awarded: 
 contracts of marriage. 
 
 See Thorn vs. Knapp, 42 N. Y., 474. 
 
 27 
 
In your official duties as servants of the government, 
 I feel confident that you will have no opportunity to 
 handle such a case. In your private capacities, permit 
 me to express the hope that you will at least be careful, 
 and that you will avoid such a liability. 
 
 In all other classes of contracts, the amount recoverable 
 is limited to the actual damage caused by the breach or 
 default ; and the measure of damage is the same whether 
 the breach be intentional or wilful, or the result of in- 
 abihty to perform. 
 
 The foregoing principles obtain in contracts wherein 
 there is no express provision for liability in case of 
 breach. Such an express provision, you must remember, 
 is entirely unnecessary to create them or to put them into 
 effect. I will say, however, that it is the almost universal 
 practice to insert in government contracts some stipula- 
 tion as to the liability of the contractor in case he should 
 fail to perform his agreement. 
 
 These stipulations are of two kinds: 
 
 1. Penalties. 
 
 2. Liquidated Damages. 
 
 Before taking up the discussion of these two terms, I 
 cannot refrain from urging upon you the imperative ne- 
 cessity of avoiding a mistake which is so common and 
 prevalent among the officers and employes of the govern- 
 ment, to wit: the misuse of these words. They are in 
 NO SENSE synonymous or interchangeable. Their meaning 
 and import is as different as black and white. Yet I know 
 from personal experience and observation that in many 
 of the bureaus of the government they are not so differ- 
 entiated. 
 
 I will go further, and I state it as a fact that the un- 
 intelligent and reckless use of those two terms alone costs 
 the United States thousands and thousands of dollars 
 each year. 
 
 Let us, therefore, be most careful and painstaking to 
 grasp the definitions of those terms and to hereafter be 
 correct as well as consistent in their use. 
 
 28 
 
Definitions. 
 
 Penalty. A Penalty is a sum agreed upon to be paid 
 or forfeited absolutely upon the breach or non- 
 performance of the contract, regardless of the 
 actual damages suffered, and intended more to 
 secure performance than as compensation for the 
 breach. 
 
 LiQuroATED Damages are damages agreed upon and 
 recited in the contract by the parties thereto as 
 and for compensation, and in lieu of the actual 
 damages arising from the breach of the contract. 
 
 Measure of Damages. 
 
 Penalty. Where the contract is held to provide for a 
 penalty, the actual damages suffered by reason of 
 the breach or default may be recovered, regardless 
 of whether they be greater or less than the sum 
 stipulated as the penalty. 
 
 liquidated Damages. But where the parties to a con- 
 tract have stipulated for liquidated damages, the 
 sum so named by them is the measure of damages, 
 regardless of whether it exceed or fall short of the 
 actual damage sustained by the breach. 
 
 To many of you, the definition of the word "penalty," 
 and the measure of damage thereunder, may seem to be 
 hopelessly inconsistent. I agree with you that at first blush 
 it does seem so. For I have first stated that a penalty 
 is a sum to be paid or forfeited absolutely upon the occur- 
 rence of the breach, regardless of the actual damage; and 
 in the next breath I have stated that where the contract 
 is held to provide for a penalty, the actual damage, re- 
 gardless of the stipulated sum, will be recoverable. 
 
 29 
 
But let me briefly give you the causes of this seeming 
 inconsistency. 
 
 The term "penalty" formerly arose chiefly in connec- 
 tion with that pecuUar form of obligation which was 
 known as "a common law bond." By a common law bond, 
 the obligor bound himself to pay a certain sum of money 
 at a certain time to the obligee upon the condition, how- 
 ever, that such obligation should be null and void upon the 
 payment of a certain lesser sum, or upon the perform- 
 ance of some particular act. If the promise of the obligor' 
 was fulfilled, then the bond was a nullity from thence- 
 forward. But if the obligor did not keep his promise, 
 then the sum named in the bond became the debt and 
 could be recovered in an action upon the bond. The sum 
 named in the bond was known as the penalty; and the 
 bond became known as a penal bond. 
 
 On this subject Blackstone says: 
 
 "The penalty named in the bond was originally 
 inserted for the purpose of evading the absurdity 
 of those monkish constitutions which prohibited 
 the taking of interest for money, and was there- 
 fore pardonably considered the real debt in the 
 courts of law when the debtor neglected to per- 
 form his agreement for the return of the loan with 
 interest; for the judges could not, as the law then 
 stood, give judgment that the interest should be 
 specifically paid." 
 
 See Vol. 3 Blacks. Comm. iSU. 
 
 This practice and ruling was followed by the courts 
 of law even after the passage of statutes allowing the 
 recovery of interest. Subsequently, however, equity, in 
 the growth and extension of its jurisdiction, relieved 
 against this penalty in case of default, upon the payment 
 of just compensation by the debtor. This action was 
 upon the broad ground that actual compensation, and 
 not forfeiture, is equity. 
 
 The principle just stated wajr formerly applied with 
 equal force to penal bonds and to contracts other than 
 
 30 
 
those for the payment of money. And in each of those 
 classes of cases equity allowed the recovery of only actual 
 compensation, and limited the recovery to the sum stipu- 
 lated as the penalty. 
 
 Time, however, has wrought a change and distinction 
 which both reason and justice demanded; and the vast 
 burden of modern authorities now place the penal bond 
 and a penalty-contract on a very different footing as to 
 the measure of liability thereunder. 
 
 For example : A man is appointed a Disbursing Clerk, 
 and gives bond in the sum of ten thousand dollars. The 
 bondsman is bound in the penal sum of ten thousand dol- 
 lars that such appointee will faithfully receive, disburse 
 and account for such moneys as may be placed in his 
 hands. 
 
 If the disbursing clerk defaults or steals, the bondsman 
 is liable for the amount so stolen up to the sum named 
 in the bond. But that sum is the maximum limit of his 
 liability under said bond, and he cannot be held for any 
 amount in excess thereof which may have been stolen by 
 the disbursing clerk. 
 
 In the case of penal bonds, therefore, with collateral 
 conditions, (such as bonds of public officers, appeal bonds, 
 replevin, injunction, or attachment, bonds), the penal 
 sum named is the maximum of liability on the part of the 
 bondsman. And only the actual loss sustained, up to that 
 sum, may be recovered thereunder. 
 
 See : Farrer vs. Christy, 24 Mo., 474. 
 
 Balsey vs. Hoffman, 13 Pa. St. Rep., 603. 
 
 In Contracts the Rule is Otherwise. If the con- 
 tract be construed as providing for a penalty, the stipula- 
 tion therein for the payment of a certain sum in case of 
 breach or default is not controlling, and it does not limit 
 to that sum the Uability of a defaulting contractor. 
 
 On the contrary, when the breach has occurred, the 
 contractor becomes liable for the actual damages which 
 have been caused by his breach, without regard to the 
 penalty named, and without regard to any excess over 
 its amount. 
 
 31 
 
See : Foley vs. McKeegan, 66 Amer. Dec. 107. 
 
 Lord vs. Gaddis, 9 Iowa, 267. 
 
 Shreve vs. Brereton, 51 Pa. St. Rep., 175. 
 
 i?aZe o» Damages, page 127. 
 
 Graham vs. Bickhan, 4 Dallas (U. S.), 143. 
 
 Amer. a«d £'«flr. Encyl. Law, Vol. 13, pp. 867 
 868. 
 
 Noyes vs. Phillips, 60 N. Y., 408. 
 For example: A man contracts to build a warehous( 
 for the government, the contract price being thirty-fiv( 
 thousand dollars. The work is to be completed by a cer 
 tain date; and the contract expressly provides that ir 
 case of the contractor's failure to so complete it he shal 
 forfeit to the United States a penalty of fifteen thousand 
 dollars. Let us suppose that the contractor is three days 
 late in completing the building. 
 
 Under the law of olden times, the full amount of said 
 penalty was payable and recoverable for the breach. Bui 
 under the growth of equity, it is not so recoverable ir 
 present times. The law now says in effect that it will 
 not sanction so gross an injustice, nor will it allow so 
 unconscionable a sum to be recovered in lieu of the actual 
 damages, to which it is so disproportionate. The law, 
 therefore, regards the sum stipulated, merely as a club, 
 (or, I may say as a "big stick"), held over the head of 
 the contractor "in terrorem" to spur him on to the prompt 
 fulfilment of his promise. It refuses to enforce the pen- 
 alty named; and, ignoring the stipulation, construes the 
 contract, and fixes the liability thereunder, just as though 
 the contract had been silent on the subject, and, under 
 the rules of the common law, allows only the actual com- 
 pensatory damages which have been sustained through 
 the breach. 
 
 You will readily see, I am sure, the reason why, in the 
 case of a contract which is held to provide for a penalty, 
 the maximum of the actual damage sustained is not, and 
 should not be, limited to the sum stipulated. For, would 
 it not be a gross and manifest .injustice in such a case to 
 say that the actual damages are to be paid, at the same 
 time holding that the defaulting contractor enjoys a 
 
 32 
 
limitation of liability, regardless of what damage he has 
 caused; while on the other hand, the promisee, whose 
 actual loss and damage may far exceed the stipulated 
 sum, shall be the loser to the extent of the excess of his 
 damage beyond the sum stipulated? 
 
 In the law of contracts, therefore, you must bear this 
 fact in mind : that while the word "penalty" is still cor- 
 rectly defined as I have stated, the intervention and ap- 
 pUcation of equity through the courts have materially 
 modified its force and effect. And you must especially 
 bear in mind that when we speak of a contract being 
 construed to provide for a penalty, we mean that in case 
 of the breach thereof, the actual compensatory damages, 
 whatever their amount, may be recovered. 
 
 Liquidated Da.mages. 
 
 I have heretofore defined Liquidated Damages as "The 
 damages agreed upon in a contract by the parties thereto 
 as and for compensation, and in lieu of the actual dam- 
 ages arising from a breach of the contract." 
 
 Let us now consider the question further. 
 
 In making contracts, persons are at perfect liberty to 
 stipulate for liquidated damages. In other words, it is 
 perfectly proper that after due consideration of the pos- 
 sible effects of a breach they should in good faith, reach 
 a fair and equitable agreement and conclusion as to the 
 amount of loss or damage which would be occasioned 
 through a breach. And it is perfectly proper that they 
 should incorporate into their agreement a provision that 
 such sum or sums shall, in event of the breach, be the 
 measure of damage. 
 
 There are many contracts entered into where, from 
 the very nature of the subject-matter, the actual damages 
 could not possibly be definitely ascertained. For in- 
 stance : the building of a lock and dam ; the construction 
 of a battleship, transport or dredge; or the construction 
 
 33 
 
of a telegraph line. It would, in all probability, be utterly- 
 impossible in case of the breach of such a contract to 
 state with certainty the actual damage which has been 
 caused by the breach. The law, therefore, approves the 
 liquidation of damages under such conditions. But it 
 requires the following rules to be observed and followed : 
 first, that the intention of the parties to so liquidate the- 
 damages shall be so clearly apparent as to preclude the 
 idea that the sum stated is a penalty or a sum stipulated 
 "in terrorem;" second, that the sum so stated shall not 
 on the face of the contract be unconscionably dispropor- 
 tionate to the actual loss, damage or expense which would 
 be occasioned through the breach. 
 
 I venture the statement that no branch of the law has 
 been more discussed or been made the subject of more 
 conflicting judicial expression than Liquidated Damages. 
 In almost every one of the several States we can find 
 contradictory decisions as to when, and under what cir- 
 cumstances, a provision, or an attempted provision, for 
 liquidated damages will be enforced or ignored. 
 
 Such confusion in judicial minds, I might say, is due 
 not only to the growth of equity, but also to the inisap- 
 prehension of the judges as to the limitation of their 
 powers and duties in the premises. 
 
 Prior to 1902 the tendency of the courts was to disre-^ 
 gard the language used by the contracting parties, and, 
 if possible, to construe the contract as though providing 
 for a penalty. The intent of the parties was not gathered 
 from the language used, but was sought from all the 
 circumstances of the case both before and after the mak- 
 ing and after the breach of the contract. Proof was very 
 often admitted to show that the actual damage was less 
 than the stipulated damages, and that relief should 
 therefore be granted against such disproportion. 
 
 Such a policy and such a tendency could lead to but 
 one end. The courts soon and often transgressed the 
 limits of judicial construction and were, in their judicial 
 capacities, making new contracts according to their own 
 conception of the transaction and its equities. 
 
 34 
 
The climax of this tendency was reached in the case 
 of the Chicago House Wrecking Co. vs. United States, 
 decided in 1901, and reported in 106 Federal Reporter 
 385, 389. In that decision you will find a very able re- 
 view and discussion of that side of the question. 
 
 But the error of that decision and of the policy, course, 
 and tendency, which it represents is clearly demonstrated 
 and conclusively disposed of by the Supreme Court of the 
 United States in the case of the Sun Printing and Pub- 
 lishing Association vs. Moore, 183 U. S. 642 et seq. 
 
 In this latter case a yacht was chartered and the con- 
 tract provided that in case of the non-return of the vessel 
 the sum of seventy-five thousand dollars should be paid 
 to the owner by the charterer. The yacht was lost, and 
 in an action to recover the $75,000 from the charterer, 
 the latter sought to introduce evidence to prove that the 
 vessel was not worth that sum and that the sum stipulated 
 should not be enforced since it was disproportionate to 
 the actual loss. The trial judge refused to admit the 
 evidence, holding that the stipulation of the parties as 
 to the measure of damages was conclusive upon them. 
 
 The supreme Court, through Mr. Justice White, used 
 the following language in disposing of the contention just 
 mentioned, (pages 659 and 660) : 
 
 "The complaint, that error in this regard was 
 committed, is thus stated in argument : 'The nam- 
 ing of a stipulated sum to be paid for the non- 
 performance of a covenant is not conclusive upon 
 the parties merely in the absence of fraud or 
 mutual mistake; that if the amount is dispropor- 
 tionate to the loss, the court has the right and 
 duty to disregard the particular expressions of 
 the parties and to consider the amount named 
 merely as a penalty, even though it is specifically 
 said to be liquidated damages.' 
 
 "Now it is to be conceded that the proposition 
 thus contended for finds some support in expres- 
 sions contained in some of the opinions cited to 
 sustain it. Indeed, the contention but embodies 
 
 35 
 
^ the conception of the doctrine of penalties and 
 
 liquidated damages expressed in the reasoning of 
 the opinions in Chicago House Wrecking Co. vs. 
 United States, (1901) 106 Fed. Rep. 385, 389, and 
 Gay Manufacturing Co. vs. Camp, (1895) 25 U. S. 
 App. 134, 65 Fed. Rep. 794, 68 Fed. Rep. 67, viz., 
 that 'Where actual damages can be assessed from 
 testimony,' the court must disregard any stipula- 
 tion fixing the amount and require proof of the 
 damage sustained. We think the asserted doctrine 
 is wrong in principle, was unknown to the common 
 law, does not prevail in the courts of England at 
 the present time, and is not sanctioned by the de- 
 cisions of this court. ******** 
 "The decisions of this court on the doctrine of 
 hquidated damages and penalty lend no support 
 to the contention that parties may not bona fide, 
 in a case where the damages are of an uncertain 
 nature, estimate and agree upon the measure of 
 damages which may be sustained from the breach 
 of an agreement. On the contrary, this court has 
 consistently maintained the principle that the in- 
 tention of the parties is to be arrived at by the 
 proper construction of the agreement made be- 
 tween them, and that whether a particular stipu- 
 lation to pay a sum of money is to be treated as 
 a penalty, or as an agreed ascertainment of dam- 
 ages, is to be determined by the contract, fairly 
 construed, it being the duty of the court always, 
 where the damages are uncertain and have been 
 liquidated by an agreement, to enforce the con- 
 tract." 
 So vigorous an utterance, and so decided a reversal of 
 former judicial error, demands no comment by me here. 
 The language used, and quoted, shows of itself with how 
 severe a jerk the chain curb has been applied to the run- 
 away doctrines which resulted in, and gave birth to, the 
 Court-made contract. 
 
 I cannot too strongly commend this decision to the 
 careful and thoughtful study of those of you who are in- 
 
 36 
 
terested in the question of liquidated damages. For it 
 stands out today as preeminently the leading case in our 
 country on that subject. 
 
 From the decision of the Supreme Court in that case, 
 the following conclusions must be drawn: 
 
 1. Where the parties to a contract have bona fide 
 
 stipulated for and liquidated the damages which 
 shall be paid in case of breach, the actual damages 
 which would result being uncertain or difficult of 
 definite ascertainment, the provision for such 
 liquidation will be enforced. 
 
 2. Where the parties to a contract have undertaken 
 
 to liquidate the damages which shall be paid in 
 case of breach thereof, and it is apparent on 
 the face of the contract tha.t the sum so stipulated 
 was, at the time of the making of the contract, 
 grossly or excessively disproportionate to the prob- 
 able damages which would actually result, such 
 disproportion is an important factor to be con- 
 sidered in determining whether it was the inten- 
 tion of the parties to bona fide liquidate the dam- 
 ages, or to merely stipulate for the payment of an 
 arbitrary sum as a penalty, or in terrorem, or by 
 way of security. 
 
 3. If the stipulation for liquidated damages is, on the 
 face of the contract, unconscionable and dispro- 
 portionate to the actual damage, the sum so stipu- 
 lated for will usually be considered a penalty, and 
 the contract, being construed as providing for a 
 penalty, will be enforced only to the extent of the 
 actual damages sustained. 
 
 4. Where the contract is construed as providing for 
 
 liquidated damages, and a breach occurs, the party 
 not at fault does not have to plead or allege the 
 damages or injuries. It is sufficient to plead the 
 contract, to allege the breach, and testimony can- 
 not be admitted to show the actual damage was 
 less than that provided for in the contract. 
 
 37 
 
Liquidated damages may be provided for in two ways : 
 1st., by a stipulation for the payment of a certain sum, 
 as such, for each day, week, or month after the occurrence 
 of the breach ; or, 2nd., by a stipulation for the payment 
 or forfeiture of a certain lump sum upon the occurrence 
 of the breach. But in either of these cases the amount 
 stipulated must be reasonable and not disproportionate 
 to the probable actual loss or damage which the breach 
 will cause. 
 
 See: Swift vs. Powell. 44 Ga., 123. 
 
 Matthews vs. Sharp, 99 Pa. St. Rep., 560. 
 Eakin vs. Scott, 70 Tex. 442. 
 Chaude vs. Shepard, 122 N. Y. 397. 
 
 One of the most common errors which is made in the 
 preparation of government contracts is the attempted 
 stipulation for liquidated damages in a contract which 
 provides for the doing of more than one thing. I have 
 several times had to deal with cases wherein the contract 
 called for the erection of two houses, or the furnishing of 
 different articles, at different prices, by a certain time, 
 and provided that in case of breach "liquidated damages" 
 should be assessed and deducted from the contract price. 
 
 In the Decisions of the Comptroller of the Treasury, 
 Volume 8, page i.87, and Volume 11, page 513, you will 
 find this class of contracts and the reasons for their in- 
 validity fully discussed. 
 
 I have not the time in which to discuss the facts and 
 circumstances of those cases ; but I shall tersely state the 
 rule of law which they follow : 
 
 Where a contract provides for the doing of two 
 or more things, the whole to be completed by a 
 certain specified date, and the whole contract is 
 not so completed by that date but is completed at 
 different dates thereafter, a provision in the con- 
 tract for liquidated damages for such delay will 
 not be enforced as such, but will be construed as 
 a penalty and enforced only to the extent of the 
 actual damage. 
 
 38 
 
The reasoning for this ruling, you will readily see ; for 
 to hold otherwise would be to award equal compensation 
 or damages for a partial breach as for a total breach. 
 
 It is impossible for me to undertake tonight to tell you 
 just when and where and how in the various contracts 
 made by the government a provision for liquidated dam- 
 ages may be validly inserted. I shall undertake only to 
 say that no such provision should be made in cases where 
 the actual damages are susceptible of definite ascertain- 
 ment ; and when such a provision is made, the sum stipu- 
 lated should be bona fide and not an arbitrary estimate of 
 probable loss. 
 
 For, as accountants, you will recognize this important 
 fact: When the government by contract requires work 
 to be done in a short or limited time, and stipulates for 
 the assessment and deduction of liquidated damages in 
 case of delay or default, it pays an additional considera- 
 tion for the insertion of those requirements. The con- 
 tractor realizes the possibility of delay or breach, and you 
 may be sure that he increases his bid by an amount suffi- 
 cient to insure him against possible loss. He makes this 
 advance, or increase, in his bid by reason of the provisions 
 of the specifications and the stipulations which will be 
 incorporated into his contract. It is immaterial to him 
 whether the proposed stipulation is valid or invalid. If 
 it is held to be valid, then he is insured, so to speak, 
 against loss through delay. If the provision is held to be 
 invalid, then he derives a double benefit and an increased 
 profit at the expense of the government. 
 
 See: Vol. 10 Decisions of Comptroller, 605. 
 
 At this point I shall stop for a few moments to lay 
 before you a sample of the contracts which are prepared 
 by officers of the government. For when you will have 
 followed it to the end you will be the better prepared to 
 grasp the truth of my statement when I say that I know 
 of no greater or more serious leak in the ship of State 
 than exists in the preparation of its contracts. In a large 
 proportion of those contracts at least one, (and often 
 both), of the following characteristics are to be found: 
 (1) Ignorance of legal requirements on the part of the 
 
 39 
 
person who drew the contract; or, (2) If such person 
 knew the law of contracts, then a carelessness through 
 failure to apply such knowledge. 
 
 Some time ago the Comptroller rendered a decision in 
 a case, the facts of which were as follows : 
 
 A certain Bureau of the government awarded a con- 
 tract for the erection or construction of three houses. 
 The contract price for the whole work was $30,550.00. 
 In the body of the contract proper, it was provided that 
 the said houses should be built in strict conformity with 
 the "revised plans and specifications hereto attached." 
 
 By the word "plans" is, and was, clearly meant the 
 drawings. 
 
 By the word "specifications" was clearly meant the de- 
 tailed requirements relative to the quantity and quality 
 of materials, the method of excavation, the installation of 
 plumbing, heating apparatus, and the like. 
 
 Bear in mind, if you please, the following important 
 facts : 
 
 Neither the contract, nor the plans, nor the specifica- 
 tions, contain the slightest stipulation or provision as to 
 the date on or by which the said contract was to be com- 
 pleted. Nor do any of those instruments provide for any 
 deduction or charge to be made against the contractor 
 in case he should fail to complete his contract by a cer- 
 tain time or date. 
 
 However, a separate and loose sheet, whereon were 
 printed many stipulations, and which bore the boldly 
 printed title "General Statement of Provisions included 
 in and forming part of this contract," was very daintily 
 attached to the contract by a piece of silk ribbon. 
 
 In this separate sheet, (section 7) , it was provided that 
 the contract should be completed in 125 working days, 
 and that in case the contractor should fail to so complete 
 the contract there should be deducted from moneys other- 
 wise due to him the sum of $25 per day for each day of 
 delay. 
 
 This separate sheet was certainly not part of the 
 "plans" or drawings. 
 
 40 
 
It was not part of the specifications, for those specifi- 
 cations were printed on a separate and different set of 
 papers. 
 
 This separate sheet was not signed by either of the 
 contracting parties. 
 
 There was nothing, save, perhaps, that dainty ribbon, 
 to evidence that the contractor had ever seen or heard of 
 its contents. 
 
 It was not referred to in the signed contract and made 
 part thereof. 
 
 As to whether or not the said sheet formed a part of 
 the contract, and as to whether the same was a matter 
 of proof, the authorities are in conflict, the better rule, 
 I think, being that it is a matter for proof with the bur- 
 den of proof resting upon the party claiming negatively. 
 In this particular case, however, it was held by the Comp- 
 troller that the said sheet was no part of the contract in 
 question ; and from that conclusion it necessarily followed 
 that none of the provisions or stipulations which ap- 
 peared in said separate sheet were applicable or enforce- 
 able as to the said contract. 
 
 Stop a moment and note the results of this executive 
 error: In the absence of a stipulation fixing the date on 
 or by which the contract should be completed, the law 
 gives to the contractor "a reasonable time" in which to 
 do so. As to what is, or constitutes, "a reasonable time" 
 is a matter of fact to be determined upon, and from, all 
 the circumstances of the particular case. This result, 
 you will readily see, affords ample opportunity for favor- 
 itism, if not for something more serious. 
 
 Further, the contractor's failure to complete the work 
 within the "reasonable time" imposed upon him only his 
 common law liability for the actual damages caiused by 
 his default. In such a case as the one I mention, the 
 actual damages may be difficult, if not impossible, of defi- 
 nite ascertainment, and the government is the loser. 
 
 But let us impose upon our vivid imaginations and, for 
 the sake of illustration, suppose that the separate sheet 
 did form part of the contract, and that the work did have 
 
 41 
 
to be done by a certain day, and that the provision for 
 liquidated damages at $25 per day was a part of the 
 contract. 
 
 Surely, I need not argue to you so elementary a propo- 
 sition as this: that if there be conflict or inconsistency 
 between the provisions of the signed contract and the 
 provisions of the specifications, the provisions of the con- 
 tract, or the signed instrument will prevail and control? 
 
 In the body of the signed contract (for which a very 
 defective printed form was used) it was provided that 
 if the contractor shall " in any respect" fail to perform 
 his contract as agreed, then the government, for such 
 failure or default 
 
 "may demand and recover * * * as liqui- 
 dated damages, a sum of money equal to twice 
 the sum agreed to he paid by the United States." 
 
 As the contract price to be paid by the United States 
 for the work was $30,550, it will be seen that for any 
 breach the contractor shall pay as "liquidated damages" 
 the sum of $61,100! 
 
 Of course such a provision is invalid and unenforce- 
 able. For it is grossly disproportionate to the possible 
 loss or damage caused by the breach, and the courts, as 
 I have shown you, will not enforce an unconscionable 
 stipulation of this character. The contract, therefore, 
 will be construed as though providing for a penalty and 
 enforced only to the extent of the actual compensatory 
 damages. 
 
 In addition to the foregoing defects in this contract 
 there still remains one to which I may call your attention 
 as an illustration of a statement made by me in the earlier 
 part of the evening. 
 
 If the attempted liquidation of damages, which appears 
 on the separate sheet, had been otherwise good, it could 
 not have been enforced in this case. For this contract 
 (if we read into it the provision of the separate sheet) 
 was for three houses to be completed on the same date. 
 Suppose, that one, or even two, of them had been com- 
 pleted on time; or, suppose that none of them were fin- 
 ished on time, but that they had been finished on differ- 
 
 42 
 
ent dates after the expiration of the contract period; in 
 none of those events could the stipulation for liquidated 
 damages at $25 per day have been enforced. 
 
 For, can it be argued that for a partial default the 
 same damages would be awarded as in the case of total 
 default? 
 
 See Volume 12, Decisions of the Comptroller of the 
 Treasury, page 750 et seq. 
 
 The foregoing, gentlemen, is but one of many actual 
 cases which I could produce to show you how defective 
 are the forms which are used in the preparation of con- 
 tracts to which the government is a party. And I there- 
 fore say with conviction and earnestness that I know of 
 no field which affords greater opportunity for the con- 
 scientious, energetic and painstaking official or clerk than 
 the reformation of the forms for government contracts 
 and the insistence that thought, care, judgment and 
 knowledge should be exercised in their preparation. 
 
 Interpretation. 
 
 Interpretation of a contract is, and should be, made 
 only where and when without it the true meaning and 
 effect of the contract would be uncertain and in doubt. 
 
 Since a contract is based upon, and, therefore, repre- 
 sents, "A Meeting of the Minds," interpretation is re- 
 sorted to for the sole purpose of ascertaining the real 
 agreement. And in this process of interpretation the 
 most conspicuous and universal rule is that the contract 
 shall be so construed, or interpreted, if possible, as to 
 carry out the real intention of the parties thereto; for 
 the intention of the parties, if legal, is the controlUng 
 factor. 
 
 Every contract represents a purpose. And if that pur- 
 pose be awkwardly or clumsily expressed, it is the task 
 of Interpretation to discover it and, by process of un- 
 raveling, to produce from it the true intent of the con- 
 tracting parties. 
 
 43 
 
Greater regard, therefore, is to be had to the real in- 
 tention of the parties than to any particular words they 
 may have used in the attempted expression of their in- 
 tent. 
 
 See: Bradley vs. Washington &c. Paoket Co., 13: 
 Peters (U. S.) 89. 
 Mauran vs. Bullus, 16 Peters (U. S.) 528. 
 In cases requiring interpretation, therefore, full con- 
 sideration must be given to the occasion or circumstances 
 which gave rise to the contract, to the relative positions 
 of the parties at the time the contract was made, and 
 to the objects sought to be thereby accomphshed by the 
 parties thereto. In all such cases due attention must be 
 given to the subject-matter in the light of such contem- 
 poraneous facts and circumstances. 
 
 See : Merriam vs. United States, 107 U. S. 437. 
 United States vs. Peck, 102 U. S. 64. 
 United States vs. Gibbons, 109 U. S. 200. 
 Mobile &c. Ry. vs. Jurey, 111 U. S. 584. 
 The whole writing should be considered in determining^ 
 the meaning of all or any of its parts. For a clause of 
 seeming vagueness is often made clear when read and 
 considered in connection with a preceding or subsequent 
 clause of the same instrument. 
 
 A very important and universally recognized rule of 
 construction is thus expressed by Lord EUenborough in 
 the case of Robertson vs. French, 4 East., 137: 
 
 "Words in a contract are to be understood in- 
 their plain, ordinary, and popular sense, unless^ 
 they have generally, in respect to the subject- 
 matter, as by known usage of trade or the like, 
 acquired a peculiar sense distinct from the popular 
 sense of the same words." 
 An illustration of the application of the foregoing rule- 
 will be found in Volume 8 of the Decisions of the Comp- 
 troller of the Treasury, page 568. 
 
 Mere errors either in grammar or in punctuation will' 
 not be allowed to defeat the plain intent of the contractT- 
 ing parties. 
 
 44 
 
If there be a conflict between the printed and the 
 -written portions of the same instrument, the rule is well 
 settled that that which is written shall control. All of 
 the circumstances, however, should be taken into con- 
 sideration and no effort left unmade to harmonize the 
 'Conflicting portions. 
 
 Where the language used in a contract is indefinite or 
 ■ambiguous, and hence of a doubtful meaning, the prac- 
 tical construction placed upon it by the parties them- 
 tselves, as shown by their acts or conduct, is entitled to 
 ^eat, if not controlling weight. 
 
 See: TovM vs. Tovliff, 122 U. S. 121. 
 
 This last mentioned rule does not mean that an errone- 
 t)us interpretation by the parties will control where the 
 meaning and intent is clear and contrary to such prac- 
 tical construction by them. 
 
 See: P. B. & W. R. R. vs. Trimble, 10 Wall. (U. S.) 
 367. 
 
 It has been held that, subject to the rules above men- 
 tioned, the parties to a contract are bound by the terms 
 which they have voluntarily employed. 
 See: 8 Michigan Rep. 66. 
 
 And it has been held that just as a man cannot plead 
 ignorance of the law, so he cannot plead ignorance of the 
 effect of the language he has used. And the Supreme 
 Court, in the case of Upton vs. Tribilcock, 91 U. S. 45, 
 has held that a contractor is bound by the language used 
 in his contract even though he did not read it. 
 
 Some of you, like myself, have doubtless had to con- 
 sider cases or settlements under contracts wherein the 
 language and intent of the parties was clear and free 
 from ambiguity, but wherein the contractor or the agent 
 of the government sought to alter the effect of the lan- 
 guage used in the contract. The Hawthorne case, re- 
 ported in Volume 11 of the Decisions of the Comptroller 
 of the Treasury, page 113, affords an excellent illustra- 
 tion of this point. 
 
 For instance : Though a contract provides for the as- 
 sessment and deduction of liquidated damages in case of 
 
 45 
 
breach, one or both of the parties may insist in perfect 
 good faith that it was not their intention to so provide, 
 but that it was, on the contrary, their intention that a 
 breach should call for and justify the collection of the 
 actual damages resulting from the breach. 
 
 Such a contention cannot be sustained ; nor is evidence 
 admissible in support thereof. The Supreme Court of 
 the United States has at least twice so ruled. 
 
 In Brawley vs. United States, 96 U. S. 173-174, Mr. 
 Justice Bradley used this language : 
 
 "The written contract merged all previous ne- 
 gotiations, and is presumed, in law, to express the 
 final understanding of the parties. If the contract 
 did not express the true agreement, it was claim- 
 ant's folly to have signed it. The court cannot 
 be governed by any such outside considerations. 
 Previous and contemporary transactions and facts 
 may be very properly taken into consideration to 
 ascertain the subject-matter of a contract, and the 
 sense in which the parties may have used particu- 
 lar terms, but not to alter or modify the plain 
 language which they have used." 
 
 In the case of Seits vs. Brewer's Refrigerating Co., 
 141 U. S., 517, Mr. Chief Justice Fuller thus expressed 
 his views on the same question : 
 
 "Undoubtedly the existence of a separate oral 
 agreement as to any matter on which a written 
 contract is silent, and which is not inconsistent 
 with its terms, may be proven by parol, if under 
 the circumstances of the particular case it may 
 properly be inferred that the parties did not in- 
 tend the written paper to be a complete and final 
 statement of the whole transaction between them. 
 But such an agreement must not only be collateral, 
 but must relate to a subject distinct from that to 
 which the written contract applies; that is, it must 
 not be so closely connected with the principal 
 transaction as to form part and parcel of it. And 
 when the writing itself upon its face is couched 
 
 46 
 
in such terms as import a complete legal obligation 
 without any uncertainty as to the object or extent 
 of the agreement, it is conclusively presumed that 
 the whole engagement of the parties, and the ex- 
 tent and manner of their undertaking, were de- 
 duced to writing." 
 There are many statutory provisions relating to, and 
 governing, the making of contracts to which the United 
 States is a party. But, as those statutes are to be made 
 the subject of a separate lecture I have made no reference 
 to them. Rather has it been my aim and endeavor to 
 suggest in very condensed form some of the elementary 
 principles of contract law, that you may the better 
 grasp the subject-matter of succeeding lectures. And, 
 if what I have said shall prove of even a little help and 
 value to any one of you, then, indeed, shall I feel more 
 than compensated for my effort. 
 
 In conclusion, gentlemen, I beg you accept my assur- 
 ances of most grateful appreciation of the honor and 
 privilege you have extended to me ; and forgive me, if you 
 please, for having so long imposisd upon your patience. 
 
INDEX 
 
 A. 
 
 Acceptance, necessary elements of, 10 li 
 
 of proposal, how may be made, 11 
 
 not as made, creates no contract 10,11 
 
 Act of Grod, defined \q 
 
 as excuse for non-performance of contract 19 
 
 Actual Damages. (See, Compensatory Damages), 
 
 Agency, contracts of, terminated by death of party 22 
 
 B. 
 
 Bond, measure of liability under penal, as differing from 
 
 liability under penalty contract 30, 31 
 
 Breach, discharge of contract by, 23 
 
 in vital matter, effect of, 25 
 
 in trivial matter, effect of, 25 
 
 of contract, defined, 23 
 
 by renunciation 23 
 
 by rendering performance impossible 24 
 
 by total or partial failure to perform 24, 25 
 
 0. 
 
 Compensatory Dame^es, defined, 28 
 
 Consideration, elements of, 15, 16 
 
 illustrations of what may be valid, 15 
 
 illustrations of illegal, and effect, 15, 16 
 
 must have legal value 13, 14 
 
 must be basis of every contract 13 
 
 passing of, creates legal rights 14 
 
 Construction of contract by parties, when to control, (See, 
 Interpretation) . 
 
 Contract, definition of, 7 
 
 Contracts, kinds of, stated and defined 9, 10 
 
 unilateral, not enforceable at law 7 
 
 Corporation, how to sign contract with Governmeni, 9 
 
 D. 
 
 Damages, defined, 26, 27 
 
 when accrue, 25, 26, 27 
 
 compensatory, defined, 28 
 
 exemplary or punitive, defined, 27 
 
 when awarded 27, 28 
 
 may be stipulated for. (See, Liquidated Damages). 
 
Death of party to contract, its eflfect, general rule 20 
 
 in contracts of marriage 21 
 
 in contracts of partnership 21 
 
 in contracts for personal services 21, 22 
 
 in contracts of agency 23 
 
 Disability, as affecting qualification of party to contract. 
 (See, Qualifications). 
 
 Discharge of contract, definition 16 
 
 by performance 16, 17 
 
 by mutual assent 17 
 
 by impossibility of performance 18 
 
 by breach 23, 24, 25 
 
 E. 
 
 Errors in grammar or punctuation, not to defeat plain intent ocf 
 
 contracting parties 44 
 
 Evidence, not admissible to alter or vary plain language of 
 
 contract. (See, also. Interpretation) 45, 46, 47 
 
 Exemplary Damages, when awarded 27, 28 
 
 Express Contract, defined and illustrated 9, 10 
 
 F. 
 
 Failure or default of sub-contraetor, not excuse for non- 
 performance of contract, unless so stipulated, 19, 20 
 
 Failure to perform, breach of contract by total or pa,rtial, 24, 25 
 
 Firm or partnership, how to sign contract with Government 8, 9 
 
 Fire, not ordinarily excuse for non-performance 19, 20 
 
 G. 
 
 Gtoverhment Contracts, parties to 7, 8, 9 
 
 how should sign 8, 9 
 
 Government on same footing as individual, in contracts 6 
 
 Grammatical errors. (See, Interpretation). 
 
 I. 
 
 Ignorance on part of contractor of effect of language used by" 
 
 'him in contract, no defense 45 
 
 Illegal consideration, effect and illustrations of 15, 16 
 
 Implied contract, defined and illustrated 9, 10 
 
 Impossibility of performance, discharge of contract by, 18 
 
 Individual, how to sign contract with Government 8 
 
 Injunction, mandatory, defined and illustrated 26 
 
 Intent of eontraeting parties. (See, Interpretation). 
 
 Interpretation, purpose of; when should be made 43 
 
 intent of parties, rather than particular words used, 
 
 to prevail 44 
 
 whole instrument should be read together 44 
 
 full consideration to be given to contemporaneous facts 
 and circumstances 44 
 
words to be understood in plain popular sense unless by 
 
 trade usage they bave acquired different meaning 44 
 
 errors in grammar or punctuation ■will not be allowed 
 
 to defeat plain intent 44 
 
 in case of conflict ibetween written and printed portions 
 
 of contract, written part prevails 45 
 
 contractor bound by terms of contract even though did 
 
 not read it before signing 45 
 
 ignorance of eflEect of language used, no defense 45 
 
 evidence not admissible to alter or vary plain language 
 
 used in contract 45, 46, 47 
 
 evidence, when admissible, and for what purpose 46 
 
 E. 
 
 Kinds of contracts, stated and defined, 
 
 express contracts 9, 10 
 
 implied contracts 9, 10 
 
 L. 
 
 Liability of United States under contracts 6 
 
 Liquidated Damages, definition 29 
 
 not synonymous with "penalty" 28 
 
 measure of damage when contract provides foi? 29 
 
 when may properly 'be provided for 33, 37 
 
 how may be provided for 38 
 
 former rulings of courts on subject 34, 35 
 
 present ruling by IT. S. Supreme C!ourt 35, 36 
 
 amount stipulated for must be reasonable 37, 38 
 
 M. 
 
 Measure of damage: — 
 
 when contract provides, or is construed to provide, for 
 
 penalty 29, 31, 32, 33 
 
 when contract provides for liquidated damages 29 
 
 under penal bond ^■'• 
 
 Modification of contract by supplemental agreement 18 
 
 Mutual assent, essential to creation of contract 10 
 
 discharge of contract by, 
 
 N. 
 
 Non-performance, through Act of God 
 
 through failure of eiA-contraetor 1^> 20 
 
 through labor strikes 19, 20 
 
 P. 
 
 Parties, must be at least two, to enforceable contract, 7 
 
 to Government contracts, how to sign 8, 
 
 to contracts, necessary qualifications of 7, 8 
 
 Partnership, contract of, terminated by death of party • . 21 
 
 how contract with Government to be signed 8, 9 
 
Penalty, definition of 2S, 29 
 
 origin of term 30, 31 
 
 measure of damage, when contract provides for 29 
 
 not synonymous with "liquidated damages" 28 
 
 present rule as to 31, 32, 37 
 
 Performance, discharge of contract by impossibility of. (See, 
 I>is<^harge). 
 
 Personal services, contract for, terminated by death of party.. 21, 22 
 
 Proposal, acceptance of, how may be made 11 
 
 and acceptance, every contract represents 10, 11 
 
 not accepted as made^ creates no contract 10, 11 
 
 how may be made 10, 11 
 
 Punctuation. (See, Interpretation). 
 
 Punitive damages, when awarded 27, 28 
 
 Q. 
 
 Qualifications of contracting parties: 
 
 sound mind 7, 8 
 
 lawful age 7, 8 
 
 no legal disability 7, 8 
 
 B. 
 
 Remedies, legal, upon breach of contract 25 
 
 mandatory injunction, defined and illustrated 2S 
 
 damages 26, 27 
 
 Benunciation, breach of contract by 23 
 
 Bights and liabilities of Government under contracts 6 
 
 s. 
 
 Signing of contracts, how to be made: 
 
 by individual 8 
 
 by firm or partnership 8, 9 
 
 by I corporation 9 
 
 Strikes, iot excuse for non-performance of contract, unless so 
 
 stipulated 19, 20 
 
 u. 
 
 Unilateral contracts, not enforceable at laiw 7 
 
 V. 
 
 Valid consideration, illustrations of what may be. 15 
 
 w. 
 
 Words, meaning and effect in contracts. (See, Interpretation). 
 Written portion of contract to prevail when in conflict with 
 
 printed portion . 45 
 
KF 801 B87 
 
 Author Vol. 
 
 Brown, John Mason LL.B. 
 
 Title Lecture on the Law Copy 
 of Contracts 
 
 
 
 Date 
 
 Borrower's Name 
 
 
 
 
 - 
 
 
 
 
 
 
 
Illllllll