Penalty Clauses - are they enforceable?
The Supreme Court has considered two appeals relating to whether certain contractual clauses were unenforceable penalties.
It was argued that an £85 parking fine was not a genuine pre-estimate of loss and therefore could not be enforced - this was widely understood to be the position until now. The Supreme Court held that such clauses may be permitted if there is a commercial justification for a deterrence and found that there was in this case.
This case has significant implications for commercial lawyers and clients. It will be interesting to see how the commercial justification test develops.
Private car park companies will be free to impose draconian charges after a
landmark ruling that also opens the way for stiff penalties for missing
dental appointments and abusing hotel wi-fi.
Companies have been given the green light to impose extra penalties to boost
profits as well as recover losses under the terms of a Supreme Court
judgment released yesterday.”
