Liquidated Damages And Penalty Clauses In Continental And Common Law – Valid Here, Invalid Over There?

Introduction

This note, dealing with liquidated damages and penalty clauses, is the second addition to a series comparing civil and common law approaches to commonly encountered problems in international disputes.

Our current topic is highly relevant in international disputes where the enforceability of penalty and liquidated damages clauses may depend on whether common law or continental law is applied to the dispute.

Following the structure of our previous post (on diverging approaches to disclosure obligations in disputes), we will compare the approach applied towards liquidated damages and penalty clauses by the law of England and Wales, on the common law side, and the law of Hungary, on the civil law side.