Liquidated Damages & Penalty Clauses - Practice Update

Introduction

Liquidated damages provisions have long been a central feature of building contracts but they are commonly used in a variety of types of contracts.

Until Cavendish Square Holding BV v El Makdessi decided in 2015, the subject of contractual penalties had not been considered by the UK’s highest court for almost one hundred years.

Since the Supreme Court’s era-defining decision in Makdessi the trouble caused by such clauses has seemed to abate.

What did the seven-justice bench decide in Makdessi; and how has the central test contained in that judgment (‘whether the detriment on the contract-breaker is out of all proportion to any legitimate interest of the innocent party’) been applied in decisions reported since then?

This webinar will critically analyse if, following the Makdessi case, commercial parties can be more certain that clauses in contracts providing for payments on the happening of certain events will be given effect before the issue has to be tested in a courtroom.

Further, what lessons arise in drafting such clauses to maximise the chances of their being enforced?

What You Will Learn

This webinar will cover the following:

• Application of the Makdessi test in cases to date
• The difference between primary and secondary obligations in a contract
• Balancing detriment against the protected interest (Permavent Ltd v Makin)
• Does the subject matter of the contract matter to the question of enforcement?
• Resolving uncertainty in a liquidated damages schedule (Buckingham Group Contracting Ltd v Peel L& P Investments and Property Ltd)
• Are interest provisions subject to the rule against penalties?
• Drafting considerations in writing a liquidated damages clause

This webinar was recorded on 10th July 2023