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Penalty Clauses

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Chapter Summary

A penalty clause can be defined as one stipulating payment of a sum of money in the event of non-performance of a contractual obligation, with a purpose either of pure indemnification or of deterrence. This chapter seeks to establish the differences between penalty clauses and certain similar provisions, such as judicial penalties or withdrawal payments. There are three possible ways of setting out the analysis: clauses can be considered according to the type of contract from which they are taken; they can be classified according to the type of breached obligation that they seek to penalize; the different technical aspects of clauses considered can be classified. The chapter sets out main findings emerging from the analysis of sample of clauses under consideration. It shares some thoughts on the practice relating to penalty clauses in international contracts and on the main legal problems encountered in practice.

Keywords: contractual obligation; international contracts; judicial penalties; penalty clause; withdrawal payments



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