Appellant, a fictitious company, sought review of a judgment of the Superior Court of the City and County of San Francisco, California, which held that a liquidated damages provision in a contract between the company and a judgment debtor of respondent individual was void, and that money retained under the liquidated damages provision was a debt owing to the judgment debtor.
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The company and the individual executed a contract by which the company was to supply a certain number of coffee machines within a given amount of time, and was not to supply the same machines to any other. The company name was signed by its owner, who, following the breach of the contract, claimed not to be bound because the company was fictitious, and it was evident from the manner of signing that he, as the agent for the fictitious company, was not to be bound. The lower court found in favor of the non-breaching party, finding that the owner was doing business under the fictitious name and the manner in which he signed the contract could not relieve him of personal liability. On appeal, the court affirmed, finding further that although under the contract the individual did forfeit her deposit as liquidated damages, the contract language did not control on the issue of the validity of the liquidated damages, which, in this case, constituted a penalty. The court so held because the liquidated damages clause did not represent a reasonable endeavor by the parties to estimate a fair compensation for loss or ascertain what the damages would have been in the event of a breach.
The court affirmed the judgment of the lower court, finding that the company was not entitled to any damages under any theory.