The Supreme Court has reached a decision on whether the rule against penalty clauses ought to be abolished, broadened, restricted or better codified. While the Supreme Court doubted "that the courts would have invented the rule today if their predecessors had not done so three centuries ago" it decided that judicial abolition would not be a proper course to take and that it would better codify the "test" for when a contractual provision is a penalty. The new test is: a contractual clause is penal if it was a secondary obligation which imposed a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.
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