Performance criteria liquidating damages
Performance criteria liquidating damages - mtn dating tips
There will also be costs to clean and maintain my house while I'm showing it, like mowing my yard or shoveling snow from the sidewalk.
This means that the parties already agreed on the amount of money that would be awarded should one of the parties breach the contract.In view of the high value given to the principle of freedom of contract, a Swiss judge will be reluctant to interpret the contract differently from the parties’ demonstrated intentions.Interpretation of the contract As a result of the principle of freedom of contract, contracts will be interpreted in accordance with the proven intention of the parties which may deviate from the literal wording of a contract.1 For example, if the parties agree in a written contract on the purchase of “whale meat”, while writing “shark meat”, a Swiss judge will oblige the seller to deliver “whale meat” provided that one party proves that this was the parties’ real intent at the time of the conclusion of the contract.2 The goal of the interpretation of a term or a rule in a contract is to identify the actual and mutual intention of the contracting parties.With regards to the debtor, liquidated damages provide for more transparency regarding the financial consequences of a breach of contract, since liquidated damages clauses usually contain a limitation of liability. If the contractual penalty is chosen, the creditor forfeits its right to demand for specific performance. In case of a cumulative penalty the creditor can request performance of the Main Obligation and payment of the contractual penalty. 20 SFT, decision of 17 July 1979, 105 II 200, cons. DT04255_12/14 Distinction between liquidated damages (Schadenspauschale) and contractual penalty (Konventionalstrafe) Liquidated damages have no punitive function, but are directed at anticipated compensation for damage.Limitations If liquidated damages by far exceed the actual damage incurred, such liquidated damages are also subject to the judicial review and possible reduction applying to the contractual penalty (art. 3 Swiss Code of Obligations (“CO”) by analogy; see below).6 Since liquidated damages generally represent a contractual limitation of liability on the respective amount of the liquidated damages, it is generally not possible for the creditor to claim for additional damages, except in cases of unlawful intent or gross negligence by the debtor (under Swiss law, an agreement to waive liability for gross negligence or unlawful intent is null and void if concluded in advance)7.8 4 SFT, decision of 25 October 2005, 4C.241/2005, cons. Accumulation A cumulative contractual penalty may be agreed upon by the parties and is statutorily presumed in case the penalty was stipulated for the compliance with deadlines or with the place of performance (see art. Exclusivity In case the parties agreed an exclusive contractual penalty, the penalty corresponds to the minimum amount, but also to the maximum amount that the creditor can demand. 6; 21 SFT, decision of 30 October 2006, 1033 III 43, cons. Generally, the creditor has to prove the existence of actual damage bot not its extend.Under Swiss law, there is a distinction between liquidated damages (Schadenspauschale) and contractual penalties (Konventionalstrafe), even though statutory law only explicitly regulates the contractual penalty.
Liquidated damages and contractual penalty under Swiss law Relevant legal principles of interpretation Freedom of contract and priority to the parties’ intentions Under Swiss law, freedom of contract is an important principle which has its roots in the Swiss Constitution.We make a contract that says you'll pay 0,000, and we'll close this deal at the end of the month. Our contract says that I can keep your ,000 if you don't end up closing the deal and buying my house. But, there are actually several different types of money damage awards.However, if I prevent the purchase, then you get your ,000 back. There's even a type that can be decided when the contract is made and before the contract is ever breached.Swiss law plays an important role in international contracts in general and in contracts for construction projects in particular.Swiss law is frequently chosen to govern such contracts because it is considered to be balanced with respect to the contractual parties as well as to the project and, accordingly, does not favor one or the other party.If such actual and mutual intention cannot be identified and if the validity of the contract is not in dispute, on a second level, a Swiss judge will amend the contract in accordance with the hypothetical intention of parties acting in good faith. 2 See Gauch/Schluep/Schmid/Emenegger, Schweizerisches Obliationenrecht Allgemeiner Teil, Band I II, 9th edition, Zurich/Basel/ Geneva 2008 (cited Gauch), marginal note 213. Contractual penalty (Konventionalstrafe) Purpose and prerequisites According to Swiss law, the parties may agree upon a contractual penalty (Konventionalstrafe) that is triggered in case the debtor is in breach of a specific contractual obligation (“Main Obligation”), e.g. In spite of its name, the purpose of a contractual penalty is primarily to encourage performance of the Main Obligation and, therefore, to secure the interests of the creditor rather then solely a punishment of the debtor.9 Further, like the concept of liquidated damages, a contractual penalty is often used where the calculation of damage is difficult or impossible, e.g. Accordingly, the substance of a contractual penalty and, in particular, the relation between the claim for specific performance and the contractual penalty is to be determined according to the true intention of the parties. The SFT ruled that the forfeiture of a right could also be construed as a contractual penalty.12 What conditions (non-performance or breach of the Main Obligation such as delay, violation of a duty of omission, etc.) trigger the contractual penalty is also determined by the agreement between the parties (possibly under consideration of the hypothetical intention of parties acting in good faith; see above). If the creditor has incurred damage and that damage amounts to more than the amount of the contractual penalty, the excess amount may be claimed in addition to the contractual penalty, provided that the creditor can prove that the damage occurred due to a fault of the debtor.