Penalty Decision Muddies the Waters
11 December 2015 by Ashton Carter
A recent decision of the Supreme Court has reshaped the way contractual penalties are perceived and interpreted in potential breach of contract and penalty claims.
The position at law is that any penalty clause imposed either explicitly or implied within a contract of any type, would need to be quantified in direct correlation with the actual loss incurred.
However, in the case of Beavis v ParkingEye, where an £85 penalty was imposed upon an individual overstaying their two-hour parking ticket limit by approximately an hour.
In reviewing the penalty imposed, the Supreme Court decided that this was a just penalty to impose, regardless of their having suffered no quantifiable loss!
As a result, the interpretation of penalty clauses and their reasonableness has been cast in to even further doubt. It appears greater emphasis will be placed upon the Court’s particular discretion and their assessment of proportionality of any penalties imposed in such instances.
Given that this is a move to a predominantly subjective test, the propensity for inconsistent decisions is becoming a real risk. In short, it may no longer be possible to argue that any such penalties imposed are unreasonable and therefore, unenforceable.
So the next time you receive a parking fine, penalty or other payment penalty, think first before challenging its validity legally!
If you require any advice or assistance in relation to such matter, we here at Fisher Jones Greenwood LLP can assist. Should you wish to discuss your matter at all or one affecting your business, please contact our Corporate Commercial Department on 01245 584515 or [email protected]