Penalty Doctrine Considered by High Court of Australia after Cavendish

9 August 2016
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Key takeaways

  • Australia’s highest court has considered an alleged penalty clause and has taken an approach largely consistent with last year’s UK Supreme Court decision in Cavendish.
  • The judgment confirms, however, that while the penalty doctrine only applies to secondary obligations under English law, Australian law allows a broader range of clauses to be considered penalties in appropriate circumstances.
  • The general commitment of common law jurisdictions to freedom of contract and upholding parties’ bargains remains a key theme of the judgments in both England and Australia.