PENALTY, in its original and proper sense, is a pecuniary punish ment imposed by statute upon parties guilty of certain offences. This term is also used to denote a sum of money which a party to a con tract has engaged to pay in case he violates his engagement. Penalties imposed by statute are strictly regulated by statute ; but with respect to penalties created by contract, tho rule is neither so strict nor so uniform. The courts of law will not allow a larger sum to be recovered in the name of penalty than is sufficient to cover the damages actually sustained; but where the parties have determined in advance the damages that shall in certain events be considered to have been sustained, and nothing essentially inconsistent with the reasonable ness of such determination appears upon the face of the transaction, the courts do not interfere, and the damages thus pre-determined are recoverable under the name of liquidated damages. Where a penalty is fixed, co nomine, for the breach of an agreement, and yet larger damages are actually sustained, the larger amount may be recovered as damages without recourse to the penalty. In many eases the distinc tion between a penalty and liquidated damages is often difficult to ascertain, and some of the decisions on this head are not easily reconciled.
Formerly the interference of a court of equity was often necessary to temper the severity of the common law, but by the statute 8 & 9 Wm. III., c. 11, s. 8, it was provided that in actions in courts of record upon any bond or penal sum for the performance of covenants or agreements contained in any indenture, deed, or writing, the plaintiff shall state the breaches of covenant or agreement which he has sus tained, and damages are to be assessed accordingly. If the plaintiff recover in the action, judgment is entered up [or the penalty, but execution issues only for the damages assessed by the jury upon the breaches dated and proved, the judgment remaining as a security against future breaches of the same covenant or agreement, or of other covenants or agreements contained in the same instrument, and pro tected by the same penalty. And now there is little if any difference between the practice of the courts of common law and equity upon the subject of penalties. [Bonn; DAMAGES.]