Document Type : Original Article

Author

• SeyedHosein SadatHoseini

Damghan Islamic Azad University

Abstract

Inclusion of penalty clause (predefined damages) in contracts causes the obligee to sustain less burden of proof in order to claim the same, especially in such cases the latter doesn’t have to prove that a damage is sustained. In monetary obligations, unlike non-monetary ones, the value of penalty clause is an important and challenge issue as the same is a performance guarantee. Here, stressing that the amount of penalty damages in monetary obligations is a presumption and parties – whether both or one of the parties is a bank or credit entity – are not allowed to fix penalty clause at whatever amount as the desire, it’s been argued that when penalty clause is not included in an contract and when the damaged party proceeds to claim damages under the law, the latter may claim delay damages only up to a certain ceiling and to the extent of the loss of the monetary value, which is explained by the fact that such rules are presumptive. Thus, if the parties wish to include the penalty clause condition in the contract rather than relying on the relevant provisions of law, they may not include penalty clause in the contracts at whatever amount as they desire because the rules related to penalty clause or contractual damage also fall within presumptions subject to law.

Keywords

• penalty clause
• burden of proof
• presumptions
• public order
• legal ground
• performance bond
• delay penalty