The Role of Judicial Discretion in Commercial Disputes: Penalty Clause Issues

Abstract

Nowadays, many problems caused by the imperfection of the legislation exist in applying the penalty clause category in commercial contracts. Many of them stem from belonging to different legal systems. With varying understandings of penalty clauses across jurisdictions and an uncertainty element in the inclusion of a penalty clause in contracts, the role of judicial discretion in resolving a dispute often becomes the deciding factor in dispute resolution. This research paper analyzes current trends related to judicial discretion’s role in commercial disputes and the difficulties associated with implementing a penalty clause from a theoretical and legal point of view. The problem of this study is due to the existence of a number of discrepancies in the understanding of the penalty clause in different jurisdictions and an element of uncertainty when including a penalty clause in commercial contracts, as well as convergence processes in contract law. The paper considers theoretical and doctrinal approaches to understanding the penalty clause as a legal category and the role of judicial discretion in regulating penalties within contractual legal relations. In practical terms, the study interests lawyers practicing economic and corporate law.