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Editing Contracts/Punitive damages
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{{ | {{distinguish|Penal harm}} | ||
''' | {{Refimprove|date=August 2016}} | ||
{{Contract law}} | |||
'''Penal damages''' are [[liquidated damages]] which exceed reasonable [[compensatory damages]], making them invalid under [[common law]]. While liquidated damage clauses set a pre-agreed value on the expected loss to one party if the other party were to [[Breach of contract|breach]] the contract, penal damages go further and seek to penalise the breaching party beyond the reasonable losses from the breach.<ref>{{cite AustLII|HCA|7|1989|litigants=Esanda Finance Corporation Ltd v Plessnig |parallelcite=(1989) 166 [[Commonwealth Law Reports|CLR]] 131 |courtname=auto}}.</ref> Many clauses which are found to be penal are expressed as liquidated damages clauses but have been seen by courts as excessive and thus invalid.<ref>{{cite BAILII |court=UKHL |num=1 |year=1914 |litigants=[[Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd]] |pinpoint=[4] |courtname=auto}}.</ref> | |||
The judicial approach to | 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. | ||
A wholesale review of the English law rule against penalty clauses (as opposed to penal damages) was conducted by the [[UK Supreme Court]] in the 2015 judgment in ''[[Cavendish Square Holding BV v Talal El Makdessi]]''<ref>{{cite BAILII |court=UKSC |num=67 |year=2015 |litigants=[[Cavendish Square Holding BV v Talal El Makdessi]] |pinpoint= |courtname=auto}}, a case joined with ''ParkingEye Ltd v Beavis'' for the purposes of the Supreme Court judgment.</ref> | |||
==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. | |||
==See also== | |||
*[[Penalties in English law]] | |||
==References== | ==References== | ||
{{Reflist}} | {{Reflist}} | ||
{{DEFAULTSORT:Penal Damages}} | |||
[[Category:Contract law]] | |||
{{Law-stub}} | |||
