It is the compensation determined by the two contracting parties in advance in the contract when either party fails to implement or delay its obligations.
The essence of the Penalty Clause is that agreement on it must take place in advance; that is, before any breach of the obligations arising from the contract occurs, given that if the agreed compensation is determined between the creditor and the debtor after the breach of it, it is not a Penalty Clause, but rather a conciliation contract.
The penalty clause may be placed whatever the subject of the obligation; the subject of the commitment may be an act or an abstention from the act or the granting of an in-kind right; for example, two people enter into a sales contract and agree to oblige everyone who refuses or delays to implement a Penalty Clause, and the subject of the obligation may be to pay an amount Of money, the two parties agree to compel the debtor to pay an additional amount in excess of the original amount in the event of late payment.
