Hamish Lal
May 2003
A paper based on the second prize entry in the Hudson Prize Competition 2002 presented to the Society of Construction Law in London on 6th May 2003.
The author examines the view that the doctrine of penalties has no application to a clause which provides for the payment of an agreed sum on the happening of a specified event rather than upon a breach of contract (the principle). This is a potential source of trouble (since relief is available for penalties but not otherwise) - particularly when the principle is applied to the exercise of an option to terminate a contract conditional upon a breach of contract or on the occurrence of a specified event where prevention of that event appears to be the responsibility/risk of the payer. The paper considers cases where the principle has been applied (Part A) and the judicial treatment of liquidated damages, and the courts reluctance to interfere with the parties' freedom of contract (Part B).
Introduction A. Sum must be payable only on a breach - Lord Denning's 'absurd paradox' - Judicial support for Lord Denning - B. The judicial treatment of liquidated damages - Conclusion.
The author: Dr Hamish Lal is a solicitor at Freshfields Bruckhaus Deringer in London.
Text 14 pages.
PDF file size: 97k