The issue of correctly drafted contractual provisions regarding the calculation of a contractual penalty may prove crucial in the process of pursuing such a claim in court.
For a contractual provision regarding a penalty to be valid and produce legal effects, it must include essential elements as set out in Article 483 § 1 of the Polish Civil Code (CC).
The essential components of a contractual penalty clause include:
- the obligation, or at least a specific duty, whose non-performance or improper performance triggers the obligation to pay the contractual penalty, therefore, it is necessary to specify the basis for its calculation;
- indication of the amount the debtor is obliged to pay due to the non-performance or improper performance of the contract.
Regarding the fulfilment of the second requirement, the Supreme Court ruled in a judgment of 17 May 2023 (case no. II CSKP 216/22), stating that “a contractual penalty must be capable of being calculated at the time of contract conclusion, and its amount should not be subject to evidentiary proceedings.”
Although the contract does not have to state the penalty amount explicitly—though such a construction is certainly advisable, it is permissible to use another measure of the penalty’s amount, such as a fraction of the value of an item or a fraction of another sum (e.g., remuneration), provided that determining the amount would be a purely arithmetic task. On the other hand, adopting a legal construction that defers determining the basis for calculating the contractual penalty to the future is not compliant with the aforementioned provision of the Civil Code.
In other words, if the parties do not specify the amount of the contractual penalty directly, the contract must unambiguously determine a basis for calculating it that is calculable at the time the contract is concluded. It is essential that both the parties to the agreement and the court examining the case can determine the amount of the contractual penalty. This means that the penalty should be calculable at the time the contract is signed and its amount should not require further evidence.