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Penalty clauses … bite size

A penalty clause is a provision in a contract which requires a specific sum to be paid in the event of a breach of contract and the sum specified is not a genuine estimate of the loss which the injured party would have suffered in the event of a breach.

Penalty clauses are designed to threaten or penalise the party who breaches the terms of the contract.

Penalty clauses are invalid.

 

Key case:

Cavendish Square­­v Makdessi (2015)

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