UCL Discovery
UCL home » Library Services » Electronic resources » UCL Discovery

Rationalising the Penalties Rule

Saprai, Prince; (2024) Rationalising the Penalties Rule. In: Saprai, Prince and Chen-Wishart, Mindy, (eds.) Research Handbook in the Philosophy of Contract Law. Edward Elgar: Cheltenham. (In press).

[thumbnail of SAPRAI, RATIONALISING THE PENALTIES RULE (FINAL).pdf] Text
SAPRAI, RATIONALISING THE PENALTIES RULE (FINAL).pdf - Accepted Version
Access restricted to UCL open access staff

Download (286kB)

Abstract

The penalties rule in contract law regulates agreed remedy clauses which are punitive in their purpose or effect. Powerful moral and economic arguments have been made against the rule. Diplock LJ recommended that we should give up on trying to rationalise it. In this chapter, I argue that a look back at the history of the rule gives us reasons to be sanguine about the prospects of uncovering its justification. I distinguish two rival rationales that have played a role in shaping the current rule: the prevention of exploitation and the upholding of the primacy of compensation for breach of contract. Of the two, I argue that upholding compensation provides a better account of the contours of the rule, explaining both the rule’s scope of application, i.e., the requirement of breach of contract, and the current test used for determining whether an agreed remedy amounts to a penalty, i.e., whether the agreed remedy is extravagant or out of all proportion to the innocent party’s performance interest.

Type: Book chapter
Title: Rationalising the Penalties Rule
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Penalty clauses, liquidated damages, promise, exploitation, compensation, contract law
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of Laws
URI: https://discovery.ucl.ac.uk/id/eprint/10176729
Downloads since deposit
2Downloads
Download activity - last month
Download activity - last 12 months
Downloads by country - last 12 months

Archive Staff Only

View Item View Item