ABSTRACT
The rules relating to equitable relief against penalties are designed to prevent the victim of a breach of contract from being overcompensated for the consequences of the breach. Despite the fact that a contract may have been properly consented to, one of the terms of the contract may be struck down if it is to be properly regarded as a penalty clause. A penalty clause can be loosely defined as a clause in a contract, stipulating a sum payable on breach which does not represent a genuine pre-estimate of the damages actually flowing from the breach. Such a clause will be held to be unenforceable in equity, and the victims will be confined to damages for the actual loss which flows from the party’s default.
