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THE PENALTY CLAUSE

21 November 2019

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Not often, in the event of a dispute, people want only justice and a return to the previous situation, they tend, in most cases, to claim material or moral compensation for the damage suffered. Unfortunately, it is often difficult to prove these damages. In this regard, we bring to your attention the notion of a PENALTY CLAUSE.

THE PENALTY CLAUSE is the contractual provision according to which the parties pre-determine the amount the amount of the compensation what will be due to the party who fails to perform his obligations under the contract or fails to fulfill them.

For example, if A (creditor) and B (debtor) conclude a service contract under which B undertakes to deliver goods to A on a monthly basis, the obligation for B to pay compensation of EUR 5000 in the event of failure to comply with the obligation assumed may be determined under that contract.

The main advantage of the PENALTY CLAUSE is that there is no obligation for the creditor to prove the existence and the amount of the damage suffered, an obligation which, in many cases, represents a “diabolical probation”.

For more information about the PENALTY CLAUSE, Musat&Partners team is at your disposal!