Overview

Commercial contracts commonly include a clause which provides for the payment of a fixed sum in the event of a breach.

Clauses of this nature are often analysed either as a genuine pre-estimate of loss (an enforceable, ‘liquidated damages’ clause) or a penalty clause (unenforceable).

However, in the recent case of Azimut-Benetti Spa v Healey, the court applied a different analysis. Blair J declined, on a summary judgment application, to investigate whether a liquidated damages clause reflected a genuine pre-estimate of the claimant’s loss and instead upheld the clause on the basis that it was “commercially justifiable”.

This briefing from the litigation team at Macfarlanes has the details.