This post has been contributed by Professor Roger Halson, Module Convenor for Contract law.
The Supreme Court’s judgement in Cavendish Square Holding BV v Makdessi; Parking Eye Ltd v Beavis (Consumers’ Association Intervening), (the Cavendish case) [2015] UKSC 67 involved two conjoined appeals the first Makdessi,concerned the validity of two clauses in a substantial commercial contract which if upheld would reduce the consideration payable by more than $44M; the second, Parking the enforceability of an £85 charge for ‘overstaying’ at a car park. The Supreme Court found both clauses to be enforceable.
The Cavendish Law Report was the longest for the Supreme Court in 2015 but actually established three simple things.
- For a clause to be reviewed as a possible penalty clause it must require payment (or other act) to be performed after the performer’s breach of contract
When a clause is subject to review it is only valid if:
- It seeks to protects a legitimate interest of the party who benefits from it AND
- The sum to be paid is not out of proportion to the interest it is protecting