| Summary: | It has always been a common drafting technique in English and Australian law for contracts to contain an agreed remedy which one party (A) can claim against the other (B) in the event that B fails to fulfil her side of the bargain. This thesis answers a vital question that affects consumer, commercial and government contracting: when will a court refuse to enforce a term of a contract because it impermissibly penalises a party to that contract? The thesis provides: (i) a historical overview of the development of the law of penalties from the 14th century to the present day; (ii) a comparative analysis between the English and Australian penalties doctrines, showing sharp divergences between the approaches adopted in these two jurisdictions notwithstanding that the jurisdictions share a common starting point; (iii) an underlying moral justification for the law of penalties in both England and Australia which accounts for the key divergences between the jurisdictions; and (iv) a detailed analytical account of how the penalties doctrine operates in practice in England and Australia. A central claim made in this thesis is that the Australian penalties doctrine concerns agreed remedies that are characterised as being in the nature of security rights and prevents such rights from being enjoyed beyond the function or purpose of security, thereby preventing the imposition of an unjustifiable detriment or punishment on a contracting party. Whereas the English penalties doctrine regulates the parties' ability to determine the quantum of a secondary obligation that arises upon breach of a primary contractual obligation. The English rule prevents agreed remedy clauses which derogate too far from the state's jurisdiction to impose a remedy for breach of contract. While there is overlap between these two approaches, which is unsurprising given that the rules share a common history, they remain distinct.
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