Also known as: penal · penally · penalize · penalizes · penalized · penalizing · penalization · penalties · punishment · sanction
Written by attorneys · grounded in primary & secondary sources — see below
A contractual term that fixes damages for breach at an amount unreasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. Such a term is unenforceable on grounds of public policy.
Priscilla Parks obtained a mortgage from Prime Logistics to purchase commercial property. After three years she tendered the full remaining balance. Prime Logistics refused to record a satisfaction and demanded an additional prepayment premium. The court ordered discharge of the mortgage upon full payment because the note contained no enforceable prepayment penalty provision.
Prosperity Investments contracted with a supplier for goods. The agreement fixed damages at an amount far exceeding any anticipated loss for late delivery. When the supplier delivered late, Prosperity sought the full contractual sum. The court refused enforcement because the fixed amount bore no reasonable relation to actual harm and therefore operated as an unenforceable penalty.
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Paula Pierce contracted with Pierce Analytics to supply materials. The agreement set damages at an unreasonable fixed sum for any late delivery regardless of actual loss. When Pierce delivered late, Paula sought the full amount. The court refused enforcement because the stipulated sum bore no reasonable relation to anticipated harm and therefore operated as an unenforceable penalty.
Pinnacle Holdings contracted with Paul Peterson to supply materials. The agreement set damages at $500,000 for any late delivery regardless of actual loss. When Peterson delivered late, Pinnacle sought the full amount. The court refused enforcement because the fixed sum bore no reasonable relation to anticipated or actual harm and therefore operated as an unenforceable penalty.
Phoebe Park contracted with Prism Analytics to supply materials. The agreement set damages at an unreasonable fixed sum for any late delivery regardless of actual loss. When Prism delivered late, Phoebe sought the full amount. The court refused enforcement because the fixed sum bore no reasonable relation to anticipated harm and therefore operated as an unenforceable penalty.
Pierce Patterson sold goods to Prime Logistics under a contract that fixed damages at three times any actual loss for late payment. When Prime Logistics paid late, Pierce demanded the full contractual amount. The court held the clause void because the stipulated sum was unreasonable in light of anticipated harm and the difficulties of proving loss.
A court examines whether the amount is reasonable in light of anticipated or actual loss and the difficulties of proof of loss. If the sum is unreasonably large relative to those factors, the clause is unenforceable as a penalty on public policy grounds.
A prepayment premium is enforceable only if the note and state law permit it. Full payment of the debt still entitles the mortgagor to a release and satisfaction of the mortgage. The premium does not clog the equity of redemption or block discharge when properly recorded.
The statement must have been given under penalty of perjury at a trial, hearing, other proceeding, or deposition, and it must be inconsistent with the declarant's current testimony while the declarant is subject to cross-examination.
The amount must be reasonable in light of anticipated or actual harm, difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. An unreasonably large sum is void as a penalty.
…who does not know his rights. The defendant who does not ask for counsel is the very defendant who most needs counsel. We cannot penalize a defendant who, not understanding his constitutional rights, does not make the formal request and by such failure demonstrates his helplessness. To require the request would be to favor…