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English Reformulation of the Penalty Rule – Relevance in Singapore?: Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis [2016] AC 1172; [2015] 3 WLR 1373

Goh Yihan & Yip Man

(2017) 29 SAcLJ 257

English law on the rule against penalty clauses (“penalty rule”) has had a stable if unsatisfactory formulation for a while. The courts have long distinguished between liquidated damages and a penalty, on the basis that the former is a genuine pre-estimate of loss and that the latter is an unjustifiable tool used to coerce the performance of a contract. These long-standing principles have now to be re-evaluated in the light of the much-anticipated joint appeals of Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis (collectively “Cavendish”). The purpose of this case note is to discuss Cavendish and evaluate the impact it might have on Singapore law. The immediate task for English law is to fully work out the basis and principles of the new rule in Cavendish. The impact on Singapore law will depend on how that pans out.