As a result of the recent case (Azimut Benetti SpA (Benetti Division) v Darrell Machus Healey) a liquidated damages clause which is not based on a genuine pre-estimate of loss may not be a penalty, and may therefore be enforceable.

In that case a clause, which provided for payment of 20 per cent of the contract price on termination, was upheld. The court held that the clause was commercially justifiable and not a deterrent to termination; and that in commercial contracts what the parties agree should usually be upheld.