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A punitive measure that the law imposes for the performance of an act that is proscribed, or for the failure to perform a required act.
Penalty is a comprehensive term with many different meanings. It entails the concept of punishment—either corporal or pecuniary, civil or criminal—although its meaning is usually confined to pecuniary punishment. The law can impose a penalty, and a private contract can provide for its assessment. Pecuniary penalties are frequently negotiated in construction contracts, in the event that the project is not completed by the specified date.
n. 1) in criminal law, a money fine or forfeiture of property ordered by the judge after conviction for a crime. 2) an amount agreed in advance if payment or performance is not made on time, such as a "late payment" on a promissory note or lease, or a financial penalty for each day a building contractor fails to complete a job.
PENALTY, contr. A clause in an agreement, by which the obligor agrees to pay
a certain sum of money, if he shall fail to fulfill the contract contained
in another clause of the same agreement.
2. A penal clause in an agreement supposes two obligations, one of which is the primitive or principal; and the other, is, conditional or accessory.
3. The penal obligation differs from an alternative obligation, for this is but one in its essence; while a penalty always includes two distinct engagements, and, when the first is fulfilled, the second is void. When a breach has taken place, the obligee has his option to require the fulfillment of the first obligation, or' the payment of the penalty, in those cases which cannot be relieved in equity, when the penalty is considered as liquidated damages. Dalloz, Dict. mots Obligation avec clause penale.
4. It is difficult, in many cases, to distinguish between a penalty and liquidated damages. In general, the courts have inclined to consider the sum reserved by such agreement to be a penalty, rather than as stipulated damages. (q.v.)
5. The sum will be considered as a penalty, and not as liquidated damages, in the following cases: 1. When the parties to the agreement have expressly declared the sum to be a penalty, and no other intent is to be collected from the instrument. 2 Bos. & P. 346; 1 H. Bl. 227; 1 Pick. 45 1; 4 Pick. 179; 7 Wheat. 14; 3 John. Cases, 297. 2. When from the form of the instrument, as in the case of a money bond, it is sufficiently clear a penalty was intended.
3. When it is doubtful whether the sum was intended as a penalty or not, and a certain damage or debt is made payable on the face of the instrument. 2 B. & P. 350; 3 C. & P. 240. 4. When the agreement was evidently made for the attainment of another object, to which the sum, specified is wholly collateral, 11 Mass. 76; 15 Mass. 488; 1 Bro. C. C. 418, 419. 5. When the agreement contains several matters, of different degrees of importance, and yet the sum mentioned is payable for the breach of any, even the least. 6 Bing. 141; 5 Bing. N. C. 390; 7 Scott, 364. 6. When the contract is not under seal, and the damages may be ascertained and estimated; and this though the parties have expressly declared the sum to be as liquidated damages. 2B. & Ald. 704; 6 B. & C. 216; 4 Dall. 150; 5 Cowen, 144. See 2 Greenl. Ev. 258. 1 Holt N. P. C. 43 1 Bing. R. 302; S. C. 8 Moore, 244; 4 Burr. 2229.
6. The penalty remains unaffected, although the condition may have been partially performed; as in a case where the penalty was one thousand dollars, and the condition was to pay an annuity of one hundred dollars, which had been paid for ten years; the penalty was still valid. 5 Verm. 365.
7. A distinction seems to be made in courts of equity between penalties and forfeitures. In cases of forfeiture for the breach of any covenant other than a covenant to pay rent, relief will not be granted in equity, unless upon the ground of accident, fraud, mistake, or surprise, when the breach is capable of compensation. Edin. on Inj. 22; 16 Ves. 403; S. C. 18 Ves. 58 3 Ves. 692; 4 Bouv. List. n. 3915.
8. By penalty is understood, also, the punishment inflicted by law for its violation; the term is mostly applied to a pecuniary punishment. See 6 Pet. 404; 10 Wheat. 246; 1 Gall. R. 26; 2 Gall. R. 515; 1 Mason, R. 243; 3 John. Cas. 297: R. 451; 15 Mass. 488; 7 John. 72 4 Mass. 433; 8 Mass. 223; 8 Com. Dig. 846; 16 Vin. Ab. 301; 1 Vern. 83, n.; 1 Saund. 58, n.; 1 Swans. 318; 1 Wash. C. C. R. 1; 2 Wash. C. C. R. 323; Paine, C. C. R. 661; 7 Wheat. 13. See, generally, Bouv. Inst. Index, h.t.