Philip Bernstein (Successors) Ltd v Lydiate Textiles Ltd; orse Sterling Industrial Facilities v Lydiate Textiles Ltd: CA 26 Jun 1962

Lord Justice Diplock: ‘. . the ordinary rule which the courts apply is that contracts should be enforced, pacta sunt servanda, unless they can be brought within that limited category of cases in which, for reasons of public policy, the court refuses to give effect to the agreement of the parties. . One limited and well-known class is the class of penalty’. He described the principles: ‘In the ordinary way a penalty is a sum which, by the terms of a contract, a promisor agrees to pay to the promisee in the event of non-performance by the promisor of one or more of the obligations and which is excess of the damage caused by such non-performance.’
Diplock LJ
[1962] CA Transcript 238, [1962] 106 SJ 669
England and Wales
ApprovedIn re Apex Supply Co Ltd 1942
A hire purchase agreement provided that if the hirer should go into liquidation, and the owner should retake possession, the hirer would pay a sum by way of compensation for depreciation.
Held: The provision for the payment of compensation was . .

Cited by:
CitedEuro London Appointments Ltd v Claessens International Ltd CA 6-Apr-2006
The court considered whether a clause in an employment agency’s terms and conditions amounted to a penalty and was unenforceable. The contract provided that if the offer was withdrawn by the eventual employer after acceptance but before the . .
CitedOffice of Fair Trading v Abbey National Plc and seven Others ComC 24-Apr-2008
The Office sought a declaration that the respondent and other banks were subject to the provisions of the Regulations in their imposition of bank charges to customer accounts, and in particular as to the imposition of penalties or charges for the . .

These lists may be incomplete.
Updated: 30 December 2020; Ref: scu.240153