Michael Fletcher explains why he believes Cavendish is good news for contracting parties
The decision in Cavendish Square Holdings BV v El Makdessi and Beavis v ParkingEye Ltd [2015] UKSC 67, which has recast the test for identifying penalty clauses, inevitably creates room for debate; whenever new law is made, new grounds for dispute can arise (see further “Consumer confusion”, Thomas Samuels, p 12)
There may now be increased reason to debate whether a clause is a primary or a secondary obligation, or what the legitimate interests of a party are, or what is “proportionate protection” of such interests. However, parties who are mindful of the new test can have increased comfort that they will not fall foul of the law of penalties. While any shift in law creates some uncertainties, the overall message here is one of good news and greater flexibility for contracting parties.
First, although the Supreme Court declined to abolish the law of penalties, it appears unlikely to apply where parties are of comparable bargaining power and are professionally advised. The courts’ reluctance to interfere with contracts entered
