Chapter

3 The Legal Effect of Classification as a ‘Penalty’ or a Valid Liquidated Damages Clause

Roger Halson

in Liquidated Damages and Penalty Clauses

Published in print March 2018 | ISBN: 9780198785132
| DOI: https://dx.doi.org/10.1093/law/9780198785132.003.0003
3 The Legal Effect of Classification as a ‘Penalty’ or a Valid Liquidated Damages Clause

Show Summary Details

Preview

The previous chapter described the test laid down in the Cavendish case that determines the validity of any stipulated damages clause. In summary, a clause will be unenforceable which seeks to impose upon a party in breach of contract: a detriment which is not proportionate to any legitimate interest of the other party to the contract; or in ‘straightforward’ cases (still governed by the older Dunlop test): a detriment which is ‘extravagant and unconscionable’ in comparison with a ‘genuine pre-estimate’ of the loss that would result from the payer’s breach of contract. This chapter discusses the legal effect of contractual provisions which stipulate for a detriment which first satisfy whichever of the tests above is applicable to it (legal effect: liquidated damages clause) and then the legal effect, if any, of a contractual clause that fails to satisfy the applicable test (legal effect: penalty clause).

Chapter.  18 pages.  9392 words. 

Subjects: Law

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content. subscribe or login to access all content.