Boetebeding
Penalty clause
A penalty clause is a contractual provision whereby the parties agree that, in the event of non-performance or defective performance of the agreement, a pre-determined sum of money shall become due as a penalty.
A penalty clause, also known as a stipulated penalty, is a contractual provision under which the debtor is required to pay a penalty to the creditor in the event of a breach. This is governed by Articles 6:91 to 6:94 of the Dutch Civil Code. The penalty is treated as compensation for loss, unless the parties have agreed otherwise.
The penalty clause is of significance in that it provides an incentive for performance and precludes disputes as to the quantum of damages. The creditor is not required to establish actual loss. The court may, however, reduce the penalty where it would be unacceptable by standards of reasonableness and fairness.
In practice, penalty clauses are frequently included in employment contracts, lease agreements and supply contracts to ensure compliance.
“In the construction contract, a penalty clause had been included providing that a penalty of €500 per week would become payable upon exceeding the completion date.”
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