It turns out that the provisions concerning contractual penalties on the basis of different laws have different meaning and consequences. It also turns out that the Polish contractual penalty has much stronger consequences for the other party to the contract than liquidated damage clause.
So what is the difference? Why the provisions on contractual penalties under Polish law are better?
A liquidated damage clause is intended to estimate damages in the event on non-performance or breach of contract. A liquidated damage clause will be enforced where the court finds that the harm caused by the breach is difficult to estimate, but where the amount of liquidated damage is reasonable compensation to the actual damage.
A Polish contractual penalty has completely different consequences, because it has a sanctioning and disciplining character, and not a compensatory one. If either party suffers damage due to non-performance or improper performance of the contract, the other party will be obliged to pay the amount indicated in the contract. This means that the parties may stipulate in the contract that the damage will be repaired in the form of payment of the amount agreed upon by them.
So what is the most important and interesting thing in the Polish contractual penalty? You do not have to show and prove what kind of damage you suffered and what is the amount of the damage. If the other party breaks the terms of the contract, which the parties decided to establish a contractual penalty, the contractual penalty simply belongs – you do not have to prove the amount of damage.
Why do we write about it?
This is a very useful institution of Polish civil law. So if you know that Polish law will apply to the contract you want to sign, remember that you can use the Polish contractual penalty. An even better solution will be if you come to our Law Firm and we prepare a contract for you, which will include all the Polish tricks that can be used in the contract.