Criminal clauses under Dutch law are contractual clauses by which the parties may impose sanctions on each other if one of them breaches a contractual obligation. Such penalty clauses generally provide for a sum of money (the penalty) to be paid by a party who violates the contract to the innocent party. They are a particularly useful tool to encourage parties to respect their contractual obligations. Beavis used the parking lot, stayed above the 2-hour limit and was charged with $85.00. Beavis argued that the charge was a punitive and unenforceable clause. The punitive clauses in the contracts allow one party to ask for additional money if the other party does not comply with the terms of the contract, such as. B late payment or insolvency. They are common in loan contracts and have a predetermined penalty amount. Unlike the compensation clauses that have been liquidated, the purpose of the criminal clauses is to punish a party for its actions.

For example, Joanna got a $10,000 loan from her bank. In the loan agreement, Joanna agreed to pay an additional $500 for each month her payments were late. When her second payment was delayed by three months, she had to pay $1,500 to the bank in addition to the payments she normally had to make. The Dutch Civil Code defines a contractual penalty as any contractual provision stipulating that the debtor, if he does not properly fulfil his obligation, must pay a sum of money or provide another benefit, whether that amount of money or any other benefit is conceived as a remedy or an inducement to carry out the undertaking. The rule of the penal clause applies only to secondary and non-primary obligations. Overall, a “primary” obligation is a stand-alone contractual obligation, while a “secondary” obligation is triggered only by an infringement and must be a contractual alternative to injury. The Court distinguishes a clause that is considered a primary or ancillary obligation. The Court will not audit the principal obligations, as this would amount to a review of contractual fairness and the Court of Justice is unlikely to consider this issue. This means that the Court will only re-examine clauses that fall into the category of secondary obligations.

With respect to determining the validity of a sanction clause, the Tribunal conducts a review to determine whether the clause is a second-order obligation that causes the aggrieved party disproportionate prejudice to the innocent party`s legitimate interest in the performance of the principal duty. The test is carried out by the following questions: the criminal doctrine applies not only to “classic” compensation clauses that provide for the payment of a sum of money in the event of a breach of contract, but may also apply to other clauses that provide: the Supreme Court has held that the application of the sanctions rule “may still raise drafting issues”. It is therefore important to develop treaty-compliant provisions that are not covered by the sanction clause rule. This is a condition imposed on a party that states that it is necessary for the party to fulfil the condition, since one of the main conditions of the contract is that it be included in the agreement.