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FAQ · Practice & Disputes

How much should a penalty clause be, and is there a limit?

A penalty clause is set by the will of the parties; however, an excessive penalty clause may be reduced by the judge. The aim is to fix an amount that encourages performance while remaining proportionate. We structure the penalty clause at a defensible level, appropriate to the nature of the work and the potential loss.

Updated · July 20261 min readCategory · Practice & Disputes
Short answer

A penalty clause is set by the will of the parties; however, an excessive penalty clause may be reduced by the judge. The aim is to fix an amount that encourages performance while remaining proportionate. We structure the penalty clause at a defensible level, appropriate to the nature of the work and the potential loss.

A penalty clause is set by the will of the parties; however, an excessive penalty clause may be reduced by the judge. The aim is to fix an amount that encourages performance while remaining proportionate. We structure the penalty clause at a defensible level, appropriate to the nature of the work and the potential loss.

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