penalty clauses


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penalty clauses

clauses that impose a liability more extensive than general damages. They are contrary to public policy and accordingly unenforceable. However, the courts will allow parties to agree the amount of damages in advance by way of what is called a liquidate damages provision. These often look the same, and the result may be little different. It has been said that the factors in determining what is allowed and what is not are as follows:
  1. (i) the difficulty of calculating the actual loss on breach;
  2. (ii) the reasonableness of the stipulated sum;
  3. (iii) a clause will be presumed penal if it makes the same sum payable for breaches of differing severity;
  4. (iv) a clause will be penal if the principal obligation is to pay money and the stipulated sum is larger.
Collins Dictionary of Law © W.J. Stewart, 2006
References in periodicals archive ?
Mr Dobson said there were penalty clauses - and when the final contract was signed a "significant amount of risk" would shift to contractors Willmott Dixon.
It also contained penalty clauses in the event of relegation and the HMRC fine too.
Before this Cassation judgment, the UAE Courts would not apply LD clauses and penalty clauses after the termination of the contract and were awarding compensation, if any, based on tort liability, which means that the claimant had to prove the actual damages sustained.
Although there are any number of breaches that can give rise either to a penalty clause or a liquidated damages clause, the two most common categories of tenant misconduct are: when the tenant leaves too early--when the tenant abandons the tenancy; and when the tenant stays too long--when the tenant holds over after the natural conclusion of the lease.
"The new State Finance Act should thus strengthen these time-lines and ensure, by way of penalty clauses, that Accounting Officers adhere to these time-lines," he said.
"The penalty clauses apply to the whole contract, including the management fee," he told a press conference in Westminster.
Asked whether there would be any financial penalties for G4S on its pounds 284m contract, Mrs May said the firm's deal was with organisers Locog, but she understood that penalty clauses were included.
In a real estate marketplace where clear-cut rules of engagement between a buyer and seller are still being moulded, potential buyers are better off arming their agreements with penalty clauses.
Penalty clauses may deter members from breaking strike out of fear of the financial consequences.
The Culture Ministry was accused of failing to submit contracts worth more than BD300,000 to the legislative and legal affairs committee and not including penalty clauses in contracts, in addition to delay in collecting hotel services and tourism fees.
This section of road has been dug up several times: Are there no 'penalty clauses' in the contractor''s agreement?
There should, however, be penalty clauses for the developer as regards construction delays.