Contractual Penalties


Despite their immense relevance in practice, contractual penalties and lump sum damages have received only little attention in Austrian legal literature. In this project, conducted by ECTIL and ETL in cooperation with the Austrian Association of Metaltechnology Industries, Ernst Karner and Alexander Longin examine selected problems of this field.

Beginning with a comparative overview of the relevant Austrian, German and Swiss provisions and case law, the purposes of contractual penalties and lump sum agreements are examined. Special attention is paid to the ‘reduction’ (Herabsetzung) of contractual penalties, a statutory possibility foreseen in all of the examined jurisdictions. Thereafter, whether also in Austria – as in Germany and Switzerland – apart from contractual penalties a separate institute of lump sum damages can be recognised, is investigated. Following an overview of legal limitations (especially the bonos mores) of contractual penalties, the issue of contractual penalties in chains of contractors, which in practice is very significant, is reviewed.