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Contractual Penalty and Lump Sum Damages

With this project, conducted by ECTIL in cooperation with ETL and the Association of Metaltechnology Industries Austria, Ernst Karner (ETL, ECTIL and Vienna University) and Alexander Longin (ETL) examine selected problems raised by contractual penalties. Despite their immense relevance in practice, such penalties have received little attention in the Austrian literature. Beginning with a comparative overview of the relevant Austrian, German and Swiss provisions and case law, the study examines the purposes of these clauses. Special attention is paid to the possibility of a retrospective ‘reduction’ (Herabsetzung) in contractual penalties, as provided for by statute in all of the jurisdictions examined. Thereafter, the analysis examines whether in Austria – as in Germany and Switzerland – a separate institute of liquidated damages can be recognised alongside contractual penalties. The latter question has as yet received no attention in Austria. Following an overview of further legal limits on contractual penalties (especially breach of good morals), the practically very significant issue of contractual penalties being passed along contractual chains is then examined.


For further information on this project please contact ectil@ectil.org.