The Law of Penalty Clauses: ‘New’ Comparative and Economic Remarks

Comparative legal scholarship has often focused on penalty clauses, in particular highlighting the macro-differences between civil law and common law. In 1995, an author also compared the efficient model on forfeited damage clauses with the real-world alternatives of different legal systems. At that time, it was possible on a general and abstract basis under the influence of mainstream law and economics. Indeed, even though there were different views how to achieve the maximation of social welfare, there was no doubt on the methodology to say what the law should be. Behavioral law and economics broke the curse and comparative analysis has no more a single reliable model to refer to. The enforcement of penalty clauses is generally considered efficient, but several cognitive biases should be assessed: overconfidence, unrealistic optimism, availability, etc. Despite the fragmentation of the efficient model, it may be still useful narrowing down the comparison on some specific aspects: for instance, the evaluation of the amount of the forfeited damage, where the efficiency depends on the criterion used by the judge. Embracing a comparative law and economics approach, the article aims to consider the last thirty years case law of different legal systems as well as the harmonization international projects concerning the law of penalty clauses.