THE PENALTY RULE: A MODERN INTERPRETATION

Abstract

This paper focuses on the common law doctrine of the penalty rule and the recent Supreme Court decision in Cavendish Square Holding v Makdessi and ParkingEye v Beavis . The state of the penalty rule prior to the judgment was unsatisfactory and criticized by both commentators and practitioners alike. Its indiscriminate application and unclear criteria was a needless source of uncertainty for both contracting parties and lawyers. Nevertheless, their Lordships in Cavendish refused to abolish the penalty rule but acknowledged its limited application in the modern commercial context. This paper accordingly aims to justify the continued existence of the doctrine on theoretical grounds within the English private law framework despite its practical obsolescence.