Penalty Clause
/ˈpɛnəlti klɔːz/
Definitions
- (n.) A contract provision stipulating a monetary or other sanction imposed for breach or non-performance to deter or compensate for default.
The penalty clause required the contractor to pay damages if the project was delayed.
Forms
- penalty clause
- penalty clauses
Related terms
See also
Commentary
Penalty clauses are distinct from liquidated damages clauses; courts may refuse to enforce penalty clauses if deemed punitive rather than a genuine pre-estimate of loss.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.