Editing Contracts/Punitive damages

{{distinguish|Penal harm}}
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{{Contract law}}
'''Penal damages''' are best seen as quantitatively excessive [[liquidated damages]] and are invalid under the [[common law]].<ref>[http://www.bailii.org/uk/cases/UKHL/1914/1.html Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1914<nowiki>]</nowiki> UKHL 1]</ref> While liquidated damages are a priori calculations of expectation loss under the contract, penal damages go further and seek to penalise a party in some way for [[Breach of contract|breach]] of a clause above and beyond the loss suffered by the innocent party as a result of this breach. Many clauses which are found to be penal are expressed as liquidated damages clauses but are seen by courts as excessive and thus invalid.

The judicial approach to penal damages is conceptually important as it is one of the few examples of judicial [[paternalism]] in contract law. Even if two parties genuinely and without coercion wish to consent to a contract which includes a penal clause, they are unable to. So, for example, a person wishing to give up smoking cannot contract with a third party to be fined $100 each time they smoke as this figure does not represent the expectation loss of the contract.

==As distinguished from other types of damages==
Penal damages are to be distinguished from '''[[punitive damages]]''', which are awarded in certain types of [[tort]] actions for actions which caused harm to the plaintiff.  Penal damages are also different from '''[[treble damages]]''', which are generally set by [[statute]] for certain violations of [[competition law]] and related laws.

{{DEFAULTSORT:Penal Damages}}
[[Category:Contract law]]


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