عنوان مقاله [English]
The conclusion of a contract may excite the parties involved because of its benefits, however, it may also cause concerns due to the possibility that one of the parties does not perform its contractual obligations. To address this concern, legal systems have provided several measures, including suspension of the effects of the contract, annulment, suspension or delay in ownership transfer, dissolution of the contract, and finally compensation through limitation of liability clause and penalty clause based on the free-will principle.
However, we should agree that the parties to a contract are not in absolute control of their “free will” since different judicial systems have provided different measures and obstacles. Iran’s civil law does not allow the courts to adjust the penalty clause.
This article will investigate the nature of the penalty clause, the conditions for its formation, its effects, the respective laws, and the judicial practice in Iran and compare them to England. The article will also provide some suggestions for the legal improvements in Iran.