Contractual penalty is a contractual sum of money which is compensation for non-performance or improper performance of a non-monetary obligation. This compensation is regulated by art. 483 of the Civil Code. Even if the parties specify in the contract the amount of the contractual penalty, the debtor may demand a reduction of the contractual penalties specified in the contract. Reducing the amount of contractual penalties is possible in two cases, i.e. when the liability has been substantially preformed or the contractual penalty is abnormally excessive. Evaluating the performance of a commitment, is taken into account the significance of what has been done for the creditor. On the other hand, “grossly excessive” contractual penalty is assessed individually in each proceeding.
