Penalty Clause in UK Law
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Robophone Facilities Ltd v Blank
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Nevertheless the Courts would be doing an ill-turn to those whom the rule about "penalty clauses" is designed to protect if they were to apply it so as to make it impracticable for parties to agree at the time when they enter into a contract upon a fair and easily ascertainable sum to become payable by me party to another as compensation for the loss which the latter will sustain as a consequence of its breach.
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Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis
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The real question when a contractual provision is challenged as a penalty is whether it is penal, not whether it is a pre-estimate of loss. These are not natural opposites or mutually exclusive categories. The question whether it is enforceable should depend on whether the means by which the contracting party's conduct is to be influenced are "unconscionable" or (which will usually amount to the same thing) "extravagant" by reference to some norm.
The true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter. His interest is in performance or in some appropriate alternative to performance.
I therefore conclude that the correct test for a penalty is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party's interest in the performance of the contract.
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Export Credits Guarantee Department v Universal Oil Products Company
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My Lords, one purpose, perhaps the main purpose, of the law relating to penalty clauses is to prevent a plaintiff recovering a sum of money in respect of a breach of contract committed by a defendant which bears little or no relationship to the loss actually suffered by the plaintiff as a result of the breach by the defendant.
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The General Trading Company (Holdings) Ltd v Richmond Corporation Ltd
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The penalty rule has been seen to have application beyond the paradigm situation of a provision that requires the payment of a sum of money in the event of breach.
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Jobson v Johnson
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A forfeiture clause, of which a right of re-entry under a lease on non-payment of rent is the classic example, may also be penal in its effect. For instance, the lease may be exceedingly valuable and the amount of unpaid rent may be small. Thus the innocent party is in a better position when seeking to enforce a forfeiture clause than when seeking to enforce a penalty clause in a contract.
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Salmon Fishery Act 1861
... ... Law of Fishing ... Penalty on mixing poisonous Substances in Rivers. 5 Penalty on mixing poisonous ... S-38 ... Saving Clause for dredging. 38 Saving Clause for dredging ... 38. Nothing in this ... ...
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General Police and Improvement (Scotland) Act 1862
... ... in this Act in the contrary implied or expressed, and whether this Clause be adopted by any Burgh or not, it is hereby enacted, That in all Cases ... Copies or Extracts to be taken as aforesaid, shall be liable in a Penalty not exceeding Ten Pounds; and in case any Person who shall be assessed ... ...
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Titles to Land Consolidation (Scotland) Act 1868
... ... 1 (with ss. 58, 62, 75); S.S.I. 2003/456, art. 2 ... 6: Import of clause expressing manner of holding ... ...
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Merchant Shipping Act 1854
... ... issued by the Board of Trade, shall for each such Offence incur a Penalty not exceeding Ten ... Application of Monies and Fines paid to Board of ... Saving Clause ... Saving Clause ... Saving of 3 & 4 Vict. c. 56. relating to East ... ...
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The Penalty Clause Bias
Common law and civil law do not seem to agree on the function of punitive liquidated damages. Whereas penalty clauses are seen as a way of enriching contract law in France and the Netherlands, they...
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Performance management: Ian Janes shows how to solve a problem featuring a minimum demand constraint resulting from the existence of a contract with a penalty clause.
...My previous article on decision-making concepts (November/December 2009) showed that a decision should be taken with ' reference to the relevant costs and benefits relating directly to it. In particular, it showed that the contribution per unit of sc......
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Norm diffusion as a tool to uphold and promote EU values and interests: A case study on the EU Japan Mutual Legal Assistance Agreement
The article takes the European Union (EU)-Japan Mutual Legal Assistance (MLA) Agreement as a case study to analyse the EU success in pursuing its art 3(5) TEU mandate of upholding and promoting its...... ... , in havingclause allowing the EU to refuse assistance if death penalty is involved, the EU arguably not onlyacted as a norm exporter, but it also ... The EU did not manage to insert a clause in the EU-US MLA Agreement allowing the EU torefuse assistance if death ... ...
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Transitional Justice: To what Extent does Trinidadian Law Regarding Capital Punishment for Murder Continue to be Hindered from Progress on Account of British Colonialism, Inciting the Need for Legal Reform?
... ... the extent to which Trinidadian law regarding the mandatory death penalty for murder, section 4 of the Offences Against the Person Act 1925, is ... It argues that on account of the ‘savings clause’ 1 that is imbued in the legislation, judicial review is inhibited ... ...
- Liquidated Damages Clause v Penalty Clause
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Penalty Clause VAR: “Extremely Harsh” But Still Enforceable
The court in Permavent v Makin determined that although the provision before it was “extremely harsh” it was not “out of all proportion” to the claimants’ legitimate business interests and so was n...
- Patents Court Finds Alleged Penalty Clause Is Firm But Fair
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UK Alert: Paying The Penalty? Supreme Court Clarifies Rule Against “Penalty Clause”
The Supreme Court has issued an important judgement that gives employers some helpful guiding principles to consider when drafting contracts in order to avoid creating unenforceable penalty clauses...