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Harder (2019) 11 EJCCL 1.pdf (6.55 MB)

The rule against contractual penalties in Great Britain and Ireland

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posted on 2023-06-09, 18:41 authored by Sirko HarderSirko Harder
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.

History

Publication status

  • Published

File Version

  • Published version

Journal

European Journal of Commercial Contract Law

ISSN

1877-1467

Publisher

Ingenta Connect

Issue

1

Volume

11

Page range

1-15

Department affiliated with

  • Law Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2019-08-21

First Open Access (FOA) Date

2020-07-31

First Compliant Deposit (FCD) Date

2019-08-20

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