Area-of-effect in the game works against the center point of each entity.
This leads to undesired result when a small AoE is used against an entity with large collision box.
The follow GIF shows the problem:
GIF
Steps to reproduce:
1) Download the following mod. It scales up the iron chest, and makes wooden chest, iron chest and grenade free to make.
(The collision box of iron chest is slightly updated after recording that GIF)
(Rocket silo may also do the trick)
2) Start a game. Place an iron chest. Maybe place some wooden chests for comparison.
3) Get yourself some grenades. Throw them near the iron chest and observe.
Expected:
Area-of-effect is applied according to collision detection. Grenade should be able to damage the iron chest whenever its area hits the collision box of the chest.