Court upholds onerous liquidated damages clause triggered by
termination of a yacht building contract.
Buyer beware – on the facts, a clause entitling a
yacht builder to liquidated damages of 20 per cent of the contract
price in the event of termination of the contract was "not
even arguably" a penalty clause.1
The claimant, Azimut-Benetti SpA ("Azimut"), was
commissioned by Shoreacres Ltd ("Shoreacres") to
construct a 60-metre motor yacht. The contract price –
EUR 38 million – was payable in instalments, and
Shoreacres' obligation to pay was personally guaranteed by its
owner, Mr Darrell Healey.
Clause 16 of the contract gave Azimut a right to terminate in
the event that Shoreacres failed to pay "any sum due
and owing ... within 45 days after the due date".
Clause 16 further provided that, in the event of lawful
termination, Azimut would be entitled to retain and/or recover an
amount equal to 20 per cent of the contract price "by
way of liquidated damages as
