Tag

Penalty Clauses

Penalty clauses – English penalties will be missed

Nov 2015 Apparently for the last 100 years we have been getting a law wrong. This law says that a clause in a contract which sets out in advance the consequences of a breach of contract will be unenforceable if it is extravagant, exorbitant or unconscionable. It is one of the few exceptions in UK law to the principle of freedom of contract...

The penalty for seeking a penalty

Dec 2014 You have to be very careful if you want to say in a contract that the other party must pay a pre-determined sum if it doesn’t do what it agreed to. The law says that if this sum is a genuine estimate in advance of the loss you might suffer it will be called ‘liquidated damages’, whereas if it is designed to scare the other party from committing a breach it will be called a ‘penalty’. And under English law a clause which seeks to impose a penalty is unenforceable. The general rule has always been that a court will decide things based on the situation at the time you entered into the contract...