Seller's Retention of Deposit vs. Penalty Clause

A party contracted for the sale of land with a stipulation requiring payment by a specific date, failing which the sale would be automatically rescinded, and the initial payment would be retained by the seller as damages; when the buyer failed to meet the deadline, the seller invoked the rescission clause, leading to a dispute over whether the stipulation constituted a penalty clause, which would require judicial modification if manifestly excessive. The court quashed the lower court's decision because, by enforcing the automatic retention of the initial payment as damages without assessing whether the stipulated sum was disproportionate to the actual prejudice suffered by the seller, the lower court failed to properly apply the legal distinction between a valid forfeiture clause and a prohibitive penalty clause subject to judicial review.