ABSTRACT
This chapter discusses the implications for charterparty provisions of the significant restatement of the law of penalties by the Supreme Court in November 2015 in the conjoined appeals in Cavendish Square Holdings and ParkingEye. It focuses on the need for liquidated or agreed damages provisions to reflect a genuine pre-estimate of loss, and insisted that where the purpose of the clause was to deter breach it must be a penalty – have been jettisoned and replaced with a new 'legitimate interest' test. The Supreme Court was unanimous that the common law rule on penalties should not be abolished because it was a long-standing provision of English law. The Supreme Court was emphatic that the courts had no power at common law to regulate the parties' primary obligations under a contract. In respect of the parties' secondary obligations, at common law the long-standing penalty rule applied to agreed or liquidated damages clauses.
