Penalty – within the sphere of Contract Law, this term details a monetary compensation for the right party, after a wrongful act or fraudulent lack of act has been done by the opposite contracted party. The role of the penalty is to compensate the party so the wrongful behaviour by the other party as if never occurred. The most common types of penalties are penalty for late performance, and penalty for total non-performance. In contracts, penalties are implemented in specific clauses, called “penalty clauses”. A synonym is “compensation” and “retribution” (n).

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