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A new deterrent against high penalty clauses?

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18/12/2020
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Penalty clauses that are manifestly disproportionate to the damage that can be suffered are presumed unfair.

This comparison to potential loss already is the validity test under general contract law, so one wonders why was it included in the b2b law, all the more since the general rule will soon change: under the New Civil Code a penalty clause may not be “manifestly unresasonable” taking into account not only the damage but also all other circumstances.

There is possibly one big difference though. While under general contract law an invalid clause may be reduced by the court, the preparatory works of the b2b law mention that an excessive penalty clause will be “set aside”.

Time will tell if courts consider that this excerpt (which is not in the law itself) will suffice to diverge from the general rule that partial nullity should be applied whenever possible. 

For the time being some caution is advised. While in the past the risk of too high penalty clauses was rather limited (reduction), nowadays it cannot be excluded that their annulment will lead to the creditor having to prove his actual loss.

These short #b2btermsrundown posts randomly identify topics of the new b2b law.

Don't hesitate to reach out to Olivier Vanden Berghe should you have any questions.