Penalty clause

{
  "id": "MLC-T-LAW-003694",
  "term": "Penalty clause",
  "field": "Law",
  "definition": "A provision in a contract that specifies a predetermined sum of money to be paid by one party to the other in the event of a breach. This sum is intended to act as a deterrent against non-performance rather than a genuine pre-estimate of damages. Courts in many jurisdictions will not enforce a penalty clause if the amount is exorbitant and disproportionate to the actual loss.",
  "url": "https://mlchart.com/terminology/law/penalty-clause/"
}