Reply to: Penalty Clause in Contract - What to do?

[Wanderer]

''you do not fulfil your obligations by starting on the agreed date you will be liable for a penalty of the greater of £6000 or 3 months projected profit ''.

So your minimum liability would be £6,000 and the maximum is pretty much any bingo numbers they care to make up. You would be barking mad to accept the work on those conditions.

The term is so ridiculous that they will know they are taking the piss with it. Tell them to strike that nonsense out of the contract.

[TheFaQQer]

Or you don't accept the contract, get it modified or organise a RoS.

This is a training company contract and it is a common clause these days. The client has probably had their fingers burnt in the past with a contract trainer letting them down.

I'd worry more about clauses that could let them wriggle out of paying you after you've run the course.

WSS - have RoS and make sure that you know someone who could step in and run it if you need them to.

What I would question with the clause is what kind of projected profit are the company looking for from you (or anyone else for that matter) running a training course? You're open to £6k penalty if you don't run the course for them, unless you negotiate of course.

[TheFaQQer]

Not necessarily so....I'd go read the 'Unfair Contract Terms Act'.....just because a contract term is in there, doesn't make it binding...it can be challenged......

As I have argued on this forum before, UCTA is incredibly difficult for companies to argue - it was designed to stop companies abusing their dominant position against a consumer.

Companies, on the other hand, normally have more chance to negotiate a contract, and options about whether they accept the contract or not.

Putting in a penalty clause like this one in the contract, and having both sides been given the opportunity to take professional advice (or even from a bunch of interweb experts!!) means that the chance of the term being ruled unfair is negligible.

[SueEllen]

Not necessarily so....I'd go read the 'Unfair Contract Terms Act'.....just because a contract term is in there, doesn't make it binding...it can be challenged......

It can be challenged but if the training company turns up to court with proof that they got 8 external delegates and 2 companies who booked your training course for particular dates, which you didn't turn up to at the last minute then you aren't going to win.

Point is giving the particular circumstances the clause is reasonable.

[cojak]

Not necessarily so....I'd go read the 'Unfair Contract Terms Act'.....just because a contract term is in there, doesn't make it binding...it can be challenged......

Or you don't accept the contract, get it modified or organise a RoS.

This is a training company contract and it is a common clause these days. The client has probably had their fingers burnt in the past with a contract trainer letting them down.

I'd worry more about clauses that could let them wriggle out of paying you after you've run the course.

[AussieDigger]

I don't agree. This has nothing to do with court. It is an agreement between two parties. If you do it you get paid this, if you don't you pay me that. That's it, end of. The only way it would go to court is if someone doesn't honour their part of the agreement.

If both parties argree the terms it has nothing to do with causation and court.

Agreeing breach of contract would be easy enough surely? The OP doesn't turn up to give the course. Seems all very straightforward to me.

Not necessarily so....I'd go read the 'Unfair Contract Terms Act'.....just because a contract term is in there, doesn't make it binding...it can be challenged......

[LisaContractorUmbrella]

Surely it depends on how he has to take it.

Any way cannot be good - you're going to need a very large glass of water or a very stiff resolve to cope with that

[northernladuk]

Yes, but to apply that penalty, one has to agree you breached the contract and that it led to the losses covered by that clause....a bit of a tall reach I would have thought....

I for one never agree to penalty clauses because they are like damages - causation has to be proven in court, not just given away...

I don't agree. This has nothing to do with court. It is an agreement between two parties. If you do it you get paid this, if you don't you pay me that. That's it, end of. The only way it would go to court is if someone doesn't honour their part of the agreement.

If both parties argree the terms it has nothing to do with causation and court.

Agreeing breach of contract would be easy enough surely? The OP doesn't turn up to give the course. Seems all very straightforward to me.

[AussieDigger]

Nope, it is a penalty clause you agree to, not a loss of sales. You are not sueing them, you are agreeing to pay a penalty. They are different things.

Yes, but to apply that penalty, one has to agree you breached the contract and that it led to the losses covered by that clause....a bit of a tall reach I would have thought....

I for one never agree to penalty clauses because they are like damages - causation has to be proven in court, not just given away...

[MyUserName]

Am still smiling.......

Did you take it as well?!!!!!

[psychocandy]

But it's a predicted risk for training companies and I would seriously have RoS in place for this eventuality (as an ex-trainer I've been a potential substitute for a mate/fellow trainer).

Yeh. I'd say a RoS and someone lined up would be the plan.

[northernladuk]

Surely it depends on how he has to take it.

Am still smiling.......

[northernladuk]

isn't this why you have PII ????

Besides, wouldn't they have to prove they lost those sales before actually suing you for them ?

Nope, it is a penalty clause you agree to, not a loss of sales. You are not sueing them, you are agreeing to pay a penalty. They are different things.

[AussieDigger]

isn't this why you have PII ????

Besides, wouldn't they have to prove they lost those sales before actually suing you for them ?

[pmeswani]

oooooooohhhhhhh that has got to hurt

Surely it depends on how he has to take it.