Chapter 28 End of Chapter Questions

. Which of the following statements about penalty clauses is false?

A clause may be a penalty clause if it stipulates for the transfer of property rather than money.

A clause may be a penalty clause even if it is labelled by the parted as 'liquidated damages'.

A clause will always be a penalty clause if it does not represent a genuine pre-estimate of loss.

None of the options given is correct.

. When determining whether a clause is a penalty clause, the courts focus on whether the clause is designed to deter breach of contract. If it is so designed, the clause will be penal. True or False?

True

False

. A hires B to work for his events company at a single event. He wishes to include a clause in the contract that will require B to pay a large sum if he damages any of the equipment. Advise A on how best to include such a provision such that the courts will not strike down the clause as a penalty.

Make the damaging of property a breach of contract and include a clause requiring B to pay a set amount of damages

Make the payment of a sum of money the result of fulfilling a number of conditions in the contract (including that the equipment is in good condition at the end of the event)

A cannot avoid the courts' interference in onerous contractual terms.

. Which of the following was not a reason why the Supreme Court in Makdessi refused to follow the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd on the point of extending the penalty rule to situations where there is no breach of contract?

There was binding House of Lords authority that a breach of contract was required to engage the rule against penalties.

The jurisdiction not to enforce penalty clauses was concerned exclusively with the secondary obligations that arise following a breach of contract.

The historical analysis of Andrews was not entirely persuasive.

The High Court of Australia's decision should not be taken into account in any way by English courts.

. In a contract between A and B, Clause 6 provides that if B breaches any condition of the contract, such as by damaging any property in the fulfilment of the contract, he has to pay £75,000. B crashes A's car whilst performing the contract. The cost of repairing the car is £20,000. The court holds that Clause 6 is a penalty clause. What sum is A likely to be entitled to recover from B?

£0

Nominal damages

£20,000

£75,000

. Which of the following factors were considered by Lord Neuberger in Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd to be relevant to the equitable discretion to give relief against forfeiture?

The conduct of the parties.

The seriousness of the breach.

The difference between the value of the property forfeited and the damages caused by the breach.

All the above factors are relevant.

. Which of the following provisions would the courts allow to operate as the parties intended in the event of a breach?

A clause requiring payment of the entire price in advance as a deposit.

A clause agreeing that specific performance must be granted following a breach of contract.

A clause agreeing that an injunction must be granted following a breach of contract.

None of the given options is correct.

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