Payments Stipulated by the Contract<sup>1</sup>

G. H. Treitel

in Remedies for Breach of Contract

Published in print October 1988 | ISBN: 9780198255000
Published online March 2012 | e-ISBN: 9780191681554 | DOI:
Payments Stipulated by the Contract1

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A contract may contain a stipulation providing for the payment of a fixed amount of money by the debtor in the event of his default. Such a clause is known as a clause pénale in French law and as a Vertragsstrafe in German law. In principle such provisions are valid in French and German law, though they are not always literally enforced. In Anglo-American law the literal translation of the French and German terms (penal clause; contractual penalty) is normally used to refer to an invalid stipulation for the payment of a fixed sum in the event of default. Where the clause is valid, it is referred to as a ‘liquidated damages’ clause. In this chapter such expressions as ‘penalty clause’ are used in the civil law sense when rules are under discussion which apply in civil law systems alone, or both in civil law and common law systems. The common law distinction between penalty clauses and liquidated damages clauses is used only in discussions restricted to common law.

Keywords: contract; penalty clause; contractual penalty; liquidated damages; civil law; common law

Chapter.  20062 words. 

Subjects: Civil Law

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