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Contractual penalties and what to keep in mind in 2014
Penalties are often used by parties to a contract as protection against a breach of obligations. Even though the law does not restrict such parties very much in how they formulate the penalty, the general principles of private law and established case law need to be considered. Otherwise, contractual penalty covenants could be invalid or the penalty could be reduced by the courts. Let’s look closer at why and when this could occur and what the new Civil Code has to say about such penalties.