Penalties in English law
The current position – Cavendish Square Holdings BV v Makdessi

The Supreme Court also affirmed that the rule against penalties will only apply to secondary obligations, i.e. obligations which arise upon breach of a primary obligation. A clause which stipulates onerous provisions in a contract may be onerous, but unless it is triggered by breach it is not a penalty in the eyes of the law. Their Lordships also observed that a penalty clause may often be simple payment of money, but it could also encompass other things, such as the withholding of payments, requirements to transfer assets, or (on the facts before them) a requirement to repay a non-refundable deposit.
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