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Supreme Court Takes Tough Line on Breach of Contract Penalties

Following the Court of Appeal decision earlier in the year, the Supreme Court has backed the case presented by ParkingEye, a firm that charges car park overstayers mouth-watering sums for exceeding their paid-for parking periods.

The case was brought by a motorist who refused to pay a charge of £85 for exceeding his allotted parking time, arguing that the charge was so disproportionate as to constitute a breach of the Unfair Terms in Consumer Contracts Regulations 1999.

In general, ‘penalty charges’ are not enforceable in British law. However, the Court, in a majority decision, ruled that the charge was such as was needed to ensure the good management of the car park and was not extravagant or unconscionable.

The Court’s decision in this and a related case, which upheld a deduction from the purchase price of a business after its former owner breached a non-competition clause, may justify consideration being given to drafting rather tougher clauses for breach of contract in one’s agreements than might have been adopted beforehand.

For advice on drafting a contract or on any aspect of contract negotiation, contact Ken Stangoe on 01908 689307 or kstangoe@geoffreyleaver.com

Partner Note

ParkingEye Ltd. v Beavis [2015] and Cavendish Square Holding BV v Talal El Makdessi UKSC 67.