Contracts Keyed to Burton
City of Rye v. Public Serv. Mut. Ins. Co
Plaintiff, the City of Rye, hired Defendant, Public Service Mutual Insurance Company, to build six luxurious apartment buildings. Under the contact between the parties, Defendant was required to post $100,000 bond and to pay $200 per day for each day after April 1, 1971 six apartment buildings were incomplete. Plaintiff did not have any statutory authority to impose such a bond. Defendant was not able to obtain enough money to complete the buildings on time, due to the changes in the market. When the development of the buildings was 500 days late, Defendant brought initiated this action against Plaintiff to obtain the full value of the bond. The trial court found for Defendant and denied Plaintiff’s motion for summary judgment. The Plaintiff appealed, and the appellate court held that the bond was unenforceable because it was penal in nature. Plaintiff appealed.
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