Bonus Clause
A bonus clause is a clause in a contract that rewards the contractor for doing more than the letter of the contract; particularly, to finish the job early. It is in apposition to a penalty clause Penal damages are liquidated damages which exceed reasonable compensatory damages, making them invalid under common law. While liquidated damage clauses set a pre-agreed value on the expected loss to one party if the other party were to breach th ... where the contractor loses by providing less than the letter of the contract, or providing it later than agreed. The aim of a bonus clause is to give a win-win situation whereby the contractor wins by getting more money for finishing early, and the holder of the contract wins by having a product earlier to market. Contract law {{Law-stub ...
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Penal Damages
Penal damages are liquidated damages which exceed reasonable compensatory damages, making them invalid under common law. While liquidated damage clauses set a pre-agreed value on the expected loss to one party if the other party were to breach the contract, penal damages go further and seek to penalise the breaching party beyond the reasonable losses from the breach. Many clauses which are found to be penal are expressed as liquidated damages clauses but have been seen by courts as excessive and thus invalid. The judicial approach to penal damages is conceptually important as it is one of the few examples of judicial paternalism in contract law. Even if two parties genuinely and without coercion wish to consent to a contract which includes a penal clause, they are unable to. So, for example, a person wishing to give up smoking cannot contract with a third party to be fined $100 each time they smoke as this figure does not represent the expectation loss of the contract. A wholesal ...
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