A Critical Reflection on the Legal Foundations for Confronting Excessive Penalty Clauses in Judicial Decisions

Document Type : scientific

Authors

1 Master's Student in Private Law, Razavi University of Islamic Sciences, Mashhad, Iran.

2 Assistant Professor, Department of Law, Razavi University of Islamic Sciences, Mashhad, Iran.

3 PhD Student in Private Law, Faculty of Law, Farabi Campus, University of Tehran, Qom, Iran.

Abstract

Stipulating a penalty clause based on the principle of party autonomy is considered a tool for confronting breach of contract and one of the means for compensation for damages, which sometimes also takes on a punitive character. However, doubts exist regarding the legitimacy of excessive penalty clauses. A group of researchers, considering the foundations for the legitimacy of penalty clauses and the explicit text of Article 230 of the Civil Code, deem them valid and binding. Conversely, another group has raised objections to such clauses and sought their legal and judicial moderation. Employing a descriptive–analytical method, the present study examines and evaluates both approaches, while undertaking a critical assessment of the efforts and arguments advanced by the second group. It argues that such attempts are inconsistent with the clear wording of Article 230 of the Civil Code. On this basis, it appears that the invalidation or moderation of excessive penalty clauses cannot be successfully achieved through the proposed foundations, from the perspective of judges. Rather, this would require the articulation of new theoretical foundations and, importantly, a legislative re-enactment of Article 230 of the Civil Code

Keywords

Main Subjects

References

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Civil Jurisprudence Doctrines
Volume 17, Issue 32
December 2025
Pages 287-318

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History

  • Receive Date: 25 April 2025
  • Revise Date: 22 June 2025
  • Accept Date: 16 July 2025
  • Publish Date: 22 December 2025

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