The rule against contractual penalties in Great Britain and Ireland

Harder, Sirko (2019) The rule against contractual penalties in Great Britain and Ireland. European Journal of Commercial Contract Law, 11 (1). pp. 1-15. ISSN 1877-1467

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Abstract

A contractual clause may provide that a party to the contract, on failing to perform an obligation under the contract, must pay a specified amount of money to the other party to the contract. All jurisdictions in Great Britain and Ireland have a common law rule which provides that such a clause cannot be enforced if it constitutes a penalty. Before 2015, all those jurisdictions applied the same test in determining whether an agreed sum constitutes a penalty. In 2015, in Cavendish Square Holding BV v Makdessi, the Supreme Court of the United Kingdom altered the test for the law of England and Wales. The new test has been adopted by the Scottish courts, but not so far by the courts in the Republic of Ireland. This article traces the development of the penalty doctrine in England and Wales, Scotland and the Republic of Ireland. It also provides a brief comparison between the common law rule against contractual penalties and the regulation of agreed sums in Continental Europe and transnational instruments.

Item Type: Article
Keywords: contract, England and Wales, Ireland, penalty, Scotland
Schools and Departments: School of Law, Politics and Sociology > Law
Subjects: K Law > K Law in General. Comparative and uniform Law. Jurisprudence > K0520 Comparative law. International uniform law
K Law > K Law in General. Comparative and uniform Law. Jurisprudence > K0520 Comparative law. International uniform law > K0600 Private law
K Law > KD Law of the United Kingdom and Ireland
K Law > KD Law of the United Kingdom and Ireland > KD0051 England and Wales
K Law > KD Law of the United Kingdom and Ireland > KDC Scotland
K Law > KD Law of the United Kingdom and Ireland > KDK21 Ireland (Eire)
K Law > KJ Europe
Depositing User: Sirko Harder
Date Deposited: 21 Aug 2019 09:17
Last Modified: 21 Aug 2019 09:30
URI: http://sro.sussex.ac.uk/id/eprint/85572

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