Any damages are supposed to be paying penalties for the sake of controlling damages. When it comes to the breach of contract and evaluation of the entire loss on the parameter of liquidated damages clause, the reference of the penalty also comes into the scenario. It is quite common that such a practice of penalty varies from one country to another. As per the Napoleonic Code, imposing penalties must be exercised to ensure the good performance of both parties during any contract.
However, nowadays, many other countries are willing to abolish the penalty factor if the amount is higher than expected. However, civil law has a strict order from the penal code that no discrimination between liquidated damages and penalties. Even if the ruling authority finds out any chance of unenforceability, the party that violated the contract must pay penalties to repair the estimated damages. It is the responsibility of the Court to transform the unliquidated into liquidated so that the victim can get the expected amount of money.
Exceptional Discretion Regarding Liquidated Damages
Although the Court plays a major role in evaluating several factors regarding the breach of contract, there are some exceptional discretions. In some cases where the possibility of disproportion is there, then Court used to lose hold over that case. Generally, in such cases, the amount of penalty is beyond the proportional level, and as a result, the amount becomes obscure. Hence, the Court remains silent in those cases, and even if a breach of contract happens still the ruling authority does not do anything.
Due to such exceptional discretion, a complaint cannot claim the required amount of money for repairing the damages. In those cases, an offender gets relief from paying that amount he/she is about to pay the penalty. Usually, a complaint calculates the entire penalty by multiplying the total amount with its net revenue. However, such a lump sum amount can only be claimed if the damages caused by the breach of contract are considered highly liquidated damage.
This particular clause becomes important for evaluating the actual amount of loss that occurred due to an illegal breach of contract and where it becomes impossible to analyze the damage. The introduction of the liquidated damages clause helps to understand actual level loss fairly instead of only vindicating the offender. After getting a clear picture of how much damages took place, there comes the matter of penalty. However, the amount to be paid as a penalty differs from country to country. However, as per the Napoleonic Code, the party must pay the penalty to the victim for violating the contract rules.
In most cases, the Court exercised the clause of liquidated damages and completed the entire procedure under the supervision of the ruling authority. However, in certain cases, the involvement of the Court can be avoided if the amount of loss is not proportionate to the liquidated damages. Therefore, a complaint is unable to claim an obscure amount of money from the party who breached the contract. The many advantages of the liquidated damages clause have become an important factor within the contract. There is no chance of disputes, offering a well-structured process for claiming penalties, and retaining the contract are some of the advantages of including this clause.
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