Reh

to be sold, under an execution against a third person,
that neither shall bid against the other, but that the
claimant may and shall buy in the property, is void as
against public policy.-Packard vs. Bird, 40 Cal., p. 378.

void.

1669. Penalties imposed by contract for any non- Penalties performance thereof, are void. But this section does not render void such bonds or obligations, penal in form, as have heretofore been commonly used; it merely rejects and avoids the penal clauses.

66

NOTE. A sum specifically named in a written agreement as liquidated damages," in case either party should fail to perform the contract, must nevertheless be construed as a penalty where, upon the face of the instrument, it appears that such a sum will necessarily be an inadequate compensation for the breach of some of the provisions, and more than enough for the breach of others.-Lampman vs. Cochran, 16 N. Y., p. 275. See Dennis vs. Cummins, 3 Johns. Cas., p. 297; Spear vs. Smith, 1 Den., p. 464; Richards vs. Edick, 17 Barb., p. 260; Mills vs. Fox, 4 E. D. Smith, p. 220; Beale vs. Hayes, 5 Sandf., p. 640.

fixing dam

1670. Every contract by which the amount of Contract damage to be paid, or other compensation to be made, ages, void. for a breach of an obligation, is determined in anticipation thereof, is to that extent void, except as ex-' pressly provided in the next section.

1671. The parties to a contract may agree therein Exception. upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.

NOTE. Where S sold to R his butcher shop, tools, etc.; at Suisun, and in his contract of sale entered into this covenant with R: "I also bind myself, in the sum of five hundred dollars, to said R, not to go into the butchering business in said Suisun without the consent of said R, in any manner whatever," it was held that the five hundred dollars mentioned in the covenant were to be regarded as "liquidated damages," and not as a penalty. Streeter vs. Rush, 25 Cal., p. 67. See, also,. Cal. Steam Nav. Co. vs. Wright, 6 Cal., p. 258, and

Restraints upon legal proceedings.

Contract in

restraint of

Fish vs. Fowler, 10 Cal., p. 512. The use of the phrase "liquidated damages" leads frequently to an evasion of the law in respect to penalties. The Courts, not venturing to declare such contracts void, constantly discourage them. They are oppressive and unconscientious, except in the cases permitted above, and ought not to be allowed. The restrictions imposed by this section are, however, new. See Bagley vs. Peddie, 16 N. Y., p. 469. See, also, cases cited in note to Sec. 1668.

1672. Every stipulation or condition in a contract, by which any party thereto is restricted from enforcing his rights under the contract by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void.

NOTE. The first part of this section is acknowledged law. A covenant in a contract, not to sue for a breach thereof, is void. The latter provision is new. The question involved has been variously decided in different tribunals, with a preponderance of opinion in favor of the right to limit the time of commencing actions, as a matter of law, but with frequent disapprobation of the practice. In support of the right, see Fullam vs. New York Insurance Co., 7 Gray, p. 6; Brown vs. Roger Williams Insurance Co., 5 R. I., p. 394; Northwestern Insurance Co. vs. Phoenix O. & C. Co., 31 Penn. St., p. 448; Portage Insurance Co. vs. West, 6 Ohio St., p. 599; Wilson vs. Etna Insurance Co., 27 Verm., p. 99; also, Ames vs. New York Insurance

Co., 14 N. Y., p. 266. Against it, see Eagle Insurance
Co. vs. Lafayette Insurance Co., 9 Ind., p. 443;
French vs. Lafayette Ins. Co., 5 McLean, p. 461.
The law itself, and the law alone, should regulate the
limitations of actions.

1673. Every contract by which any one is retrade, void. strained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided by the next two sections, is to that extent void.

NOTE.-Contracts in restraint of trade have been allowed by modern decisions to a very dangerous extent. In Dunlop vs. Gregory, 10 N. Y., p. 241, a contract not to run a certain steamboat above Saugerties,

on the Hudson, was enforced, although there was no
sale of a good will, nor any circumstance to justify the
contract, except that it was made upon a sale of a
vessel by an association of persons who had previously
used it to run above Saugerties, and wished to avoid
competition. In the case of Cal. Steam. Nav. Co. vs.
Wright, 6 Cal., p. 258, it was held that a contract not
to run boats on a certain line of travel was not void, as
being against public policy and in restraint of trade,
when a consideration was paid therefor. In such a
case the doctrine was said to be that there must not
only be a consideration for the contract, but there must
be some good reason for entering into it; and it must
impose no restraint upon cne party which is not bene-
ficial to the other. It was held that such a contract
gave no monopoly, giving an exclusive enjoyment of
the business only as against a single individual, while
all the world beside was left at full liberty to enter
upon the same enterprise. Yet this is a contract re-
straining an individual from exercising a lawful trade.
By the terms of this section, and by the following sec-
tion, the restraint imposed would seem to be obliged to
be limited to a specified county; and to this effect,
also, are the cases of Wright vs. Ryder, 36 Cal., p. 342,
and Moore vs. Bonnet, 40 Cal., p. 251. In Whittaker
vs. Howe, 3 Beav., p. 387, a contract not to practice law
anywhere in England was specifically enforced. Such
a contract manifestly tends to enforce idleness, and
deprives the State of the services of its citizens.

in favor of

sale of good

will.

1674. One who sells the good will of a business Exception may agree with the buyer to refrain from carrying on a similar business within a specified county, city, or a part thereof, so long as the buyer, or any person deriving title to the good will from him, carries on a like business therein.

NOTE. The district within which a party may exclude himself from carrying on business should be accurately defined by law. And no one should be allowed to prevent another from carrying on a business unless he himself provides the public with the same advantages in the same county or city, or part thereof.— Moore vs. Bonnet, 40 Cal., p. 251; Wright vs. Ryder, 36 Cal., p. 342.

1675. Partners may, upon or in anticipation of a

Exception dissolution of the partnership, agree that none of them

in favor of

arrangements.

partnership will carry on a similar business within the same city or town where the partnership business has been transacted, or within a specified part thereof.

Contract in restraint of

NOTE.-An agreement of this description, operating equally upon all the partners, gives to all an opportunity to start anew in business upon equal terms. In such cases, an agreement excluding them all from the county would have been too broad. It may even be doubted whether "ward" should not have been substituted for "city" in the text.

1676. Every contract in restraint of the marriage marriage, of any person, other than a minor, is void.

void.

NOTE.-Contracts in general restraint of marriage are certainly void.-Lowe vs. Peers, 4 Burr, 2225; Hartley vs. Rice, 10 East., p. 22; Baker vs. White, 2 Verm., p. 215; Sterling vs. Sinnickson, 2 South., p. 756; see Conrad vs. Williams, 6 Hill, p. 444. Perhaps a contract simply in restraint of remarriage of the wife of one of the parties would heretofore have been held valid in analogy to the rule concerning wills, but experience has shown that such stipulations tend to immorality. Restraints upon the marriage of minors are perhaps sometimes promotive of prudence, without being burdensome. For a discussion of this subject see note to Sec. 710, ante.

TITLE V.

EXTINCTION OF CONTRACTS.

CHAPTER I. Contracts, how Extinguished.

II. Rescission.

III. Alteration and Cancellation.

CHAPTER I.

CONTRACTS, HOW EXTINGUISHED.

SECTION 1682. Contract, how extinguished.

how extin

1682. A contract may be extinguished in like Contract. manner with any other obligation, and also in the guished. manner prescribed by this Title.

NOTE.-See Title IV of Part I of this Division.

CHAPTER II.

RESCISSION.

SECTION 1688. Rescission extinguishes contract.

1689. When party may rescind.

1690. When stipulations against right to rescind do not

defeat it.

1691. Rescission, how effected.

1688. A contract is extinguished by its rescission. Rescission

extin

contract.

NOTE.-An offer to return a deed does not revest the guishes grantor with the title, nor is it a rescission, or offer of rescission of the contract.-Ahrens vs. Adler, 33 Cal., p. 608. See Article on Rescission, as adjudged by way of specific relief, Secs. 3406, 3407, and 3408, post.

1689. A party to a contract may rescind the same When in the following cases only:

1. If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party;

2. If, through the fault of the party as to whom he rescinds, the consideration for his obligation fails, in whole or in part;

3. If such consideration becomes entirely void from any cause;

4. If such consideration, before it is rendered to him, fails in a material respect, from any cause; or, 5. By consent of all the other parties.

party may rescind.