What are the enforceability of contract penalties?

What are the enforceability of contract penalties?

Contract penalties are generally enforceable if they are reasonable and not punitive. Courts often assess whether the penalty is a genuine pre-estimate of loss.

Can you give me an example of a reasonable penalty?

Sure! For instance, if a contractor fails to complete a project on time, a penalty of $100 per day for each day of delay can be considered reasonable.

What happens if the penalty is deemed excessive?

If a penalty is deemed excessive, a court may refuse to enforce it or may reduce the penalty to a reasonable amount.

Are there any specific laws governing this?

Yes, laws can vary by jurisdiction, but many places follow principles established in contract law, such as the common law or the Uniform Commercial Code.