Contractual Penalties Under Polish Law
A contractual penalty (Art. 483-484 CC) is liquidated damages for non-performance of a non-monetary obligation. It exempts the creditor from proving actual damage.
When Penalties Are Inadmissible
Contractual penalties can secure only non-monetary obligations. A penalty for late payment is void.
Judicial Reduction — Art. 484 § 2 CC
The court may reduce a penalty if the obligation was substantially performed or the penalty is grossly excessive.
Cumulation of Penalties
Daily penalties can exceed the entire contract value. Courts typically reduce to 10-30% of contract value.
How to Strengthen the Creditor's Position
Upper limit (cap), linking to actual consequences, continuous damage documentation, right to supplementary damages.
How to Defend as the Debtor
Demonstrating substantial performance, minimal creditor damage, contributory fault, disproportion between penalty and contract value.
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