Accumulation of contractual penalties for non-performance or improper performance of a contract

Pursuant to Article 483 § 1 of the Civil Code, the parties to a contractual relationship may stipulate in the contract that compensation for damage resulting from non-performance or improper performance of a non-monetary obligation shall be made by payment of a specified amount (contractual penalty).

The legislator has left the stipulation of a contractual penalty and its detailed regulations to the discretion of the parties within the limits of freedom of contract granted under Article 353 (1) of the Civil Code.

A contractual penalty for improper performance of an obligation is due to the creditor if it has been stipulated and the debtor has performed the obligation, but in an improper manner. This means a situation where there is a discrepancy between the agreed performance and the performance that has been rendered, which may concern the date of performance or its quality.

In turn, the obligation to pay a contractual penalty stipulated for non-performance of an obligation arises when the debtor has not performed the service which, according to the content of the obligation, he was obliged to perform for the creditor.

In practice, it often happens that the debtor’s failure to perform or improper performance of the obligation results in the creditor submitting a statement of withdrawal from the contract, and in the event of such a situation, the parties also stipulate contractual penalties in the contract (in addition to contractual penalties for non-performance or improper performance of the contract).

In the event of such occurrences, the creditor may have doubts as to the contractual basis on which to calculate the contractual penalty, including whether it may simultaneously claim the contractual penalty stipulated for improper performance of the contract and the contractual penalty for withdrawal from the contract for reasons attributable to the debtor.

The position has been established in case law that it is not permissible to combine a contractual penalty provided for improper performance of an obligation with a contractual penalty for non-performance of the same obligation. It is assumed that in a situation where the parties have provided in the contract for both contractual penalties for improper performance of the contract and for withdrawal from the contract, then withdrawal from the contract and the imposition of penalties for this reason precludes the imposition of penalties for improper performance of the obligation (see, inter alia, the Supreme Court judgment of 28 January 2011, file ref. no. I CSK 315/10).

However, the above rule is not absolute, because in cases where the performance under the contract is divisible and the parties have provided for the possibility of withdrawal from the contract in respect of the unperformed part, it is permissible to charge penalties for improper performance of the part of the contract that has been performed and in the remaining scope, to demand a contractual penalty for withdrawal from the contract (see, inter alia, the judgment of the Court of Appeal in Krakow of 18 January 2024, ref. no. I AGa 189/22).

Therefore, it is important to ensure that the provisions relating to contractual penalties are properly formulated at the stage of concluding the contract, as the issue of correct provisions in this regard may prove crucial in the process of pursuing contractual penalties through court proceedings.

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