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How a fair contractual penalty will turn out to be unfair

  • Latvia
  • Litigation and dispute management


Author: Viktorija Jarkina

, Nr.9(40), September, 2013

An interesting case has taken place in Latvian case law - an individual tried to recover from the company Remess a contractual penalty in the amount which exceeds the contract value by more than five times. Finally, the Senate has adopted a fundamental judgment allowing recovery of a 40% smaller amount and stressed that any contractual penalty must be fair and commensurate, and that the court has the right to reduce a contractual penalty to a reasonable and fair amount. Until then, despite the negative trends in applying a contractual penalty in bad faith, the legislator kept silence. At last the log jam has broken.

Full article in Latvian language available HERE.

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