Penalty fee clause: Copy, customize, and use instantly
Introduction
A penalty fee clause outlines the penalties a party must pay if they fail to perform their contractual obligations. This clause sets the agreed-upon fee for a breach or non-compliance and helps to ensure that both parties adhere to the terms of the contract. It can be used to incentivize timely performance and protect against delays, non-compliance, or other breaches.
Below are templates for penalty fee clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard penalty fee clause
This version sets a basic penalty for non-performance.
If either party fails to perform any material obligation under this Agreement, a penalty fee of [X] dollars per day will be charged for each day the breach continues. This fee will be due immediately upon notification of the breach.
Penalty fee clause with provision for escalating penalties
This version applies escalating penalties.
If a breach is not remedied within [X] days after written notice, the penalty fee will increase by [X]% per day for each additional day of non-compliance. The penalty will continue to escalate until the breach is remedied or the Agreement is terminated.
Penalty fee clause with provision for a fixed penalty
This version applies a fixed penalty fee.
In the event of non-performance, a fixed penalty fee of [X] dollars will be charged immediately, regardless of the length of the delay or the nature of the breach. This penalty is in addition to any other damages incurred due to the breach.
Penalty fee clause with provision for late payment
This version applies a penalty for late payment.
If payment is not made within [X] days of the due date, a late payment penalty fee of [X]% of the outstanding amount will be applied. This fee will be added to the overdue balance and will accrue interest on the outstanding amount.
Penalty fee clause with provision for non-compliance with deadlines
This version applies to missed deadlines.
If [Party B] fails to meet the deadlines specified in this Agreement, [Party B] will pay a penalty fee of [X] dollars for each day the deadline is missed, up to a maximum of [Y] dollars. The penalty fee will be due immediately upon notification of the missed deadline.
Penalty fee clause with provision for refund if service is delayed
This version applies if services are delayed.
If [Party A] fails to deliver services within the agreed timeline, [Party B] will be entitled to a penalty fee of [X] dollars per day of delay. Additionally, if the delay exceeds [Y] days, [Party B] may request a partial refund of any amounts paid for undelivered services.
Penalty fee clause with provision for cap on penalties
This version limits the total penalty fees.
The penalty fees for non-performance will be capped at [X]% of the total contract value. If the penalty fees reach this limit, no additional penalties will be assessed, even if the breach continues.
Penalty fee clause with provision for remedy within a specified period
This version allows a period for remedy.
If [Party B] fails to perform as agreed, a penalty fee of [X] dollars per day will be charged for each day of non-compliance. However, if the defaulting party remedies the failure within [X] days, the penalty fee will be reduced by [Y]%.
Penalty fee clause with provision for penalty based on financial loss
This version bases the penalty on financial loss.
If either party fails to perform its obligations under this Agreement, the defaulting party will be liable for a penalty fee equal to [X]% of the financial loss suffered by the non-defaulting party due to the failure to perform.
Penalty fee clause with provision for graduated penalties
This version applies graduated penalties based on the severity of the breach.
A penalty fee of [X] dollars per day will apply for minor breaches. For more severe breaches, the penalty fee will increase to [Y] dollars per day, based on the scale of non-performance as determined by [Party A].
Penalty fee clause with provision for non-performance notification
This version requires notification for penalties.
If either party fails to perform its obligations, the non-defaulting party will notify the defaulting party in writing. A penalty fee of [X] dollars will be assessed from the date of notification until the breach is remedied.
Penalty fee clause with provision for termination after penalties accumulate
This version allows termination after penalties accumulate.
If penalty fees accumulate to [X] dollars or more, [Party A] may terminate this Agreement without notice, in addition to any other legal remedies available for non-performance.
Penalty fee clause with provision for non-payment penalty
This version applies specifically to non-payment.
If [Party B] fails to make any payments by the due date, a penalty fee of [X]% of the outstanding amount will be added to the overdue balance for each day the payment is delayed.
Penalty fee clause with provision for waiver under special circumstances
This version allows for a waiver of penalties.
In the event of non-performance, [Party A] may waive the penalty fees if the delay or breach is caused by circumstances beyond the control of the defaulting party, such as natural disasters or government action.
Penalty fee clause with provision for a one-time penalty
This version applies a one-time penalty.
If [Party B] fails to meet any deadline under this Agreement, a one-time penalty of [X] dollars will be assessed. This fee will be due immediately, and no additional penalties will apply for subsequent breaches.
Penalty fee clause with provision for service credit instead of a penalty
This version applies service credit.
If [Party A] fails to meet the agreed service level, a penalty fee of [X] dollars per day will apply. Alternatively, [Party B] may request a service credit in the same amount, which can be used for future services.
Penalty fee clause with provision for the return of goods
This version applies to goods not delivered or returned.
If the goods delivered are not as described or are returned within [X] days, a penalty fee of [X] dollars will be applied to cover the administrative and handling costs of the return process.
Penalty fee clause with provision for penalty reduction on timely correction
This version reduces the penalty for timely correction.
If a party fails to perform its obligations, a penalty fee of [X] dollars per day will be assessed. However, if the defaulting party corrects the issue within [Y] days, the penalty fee will be reduced by [Z]%.
Penalty fee clause with provision for non-performance related to intellectual property
This version applies to intellectual property.
If either party fails to perform obligations related to intellectual property rights or licensing, a penalty fee of [X] dollars will be assessed for each day of delay in meeting these obligations.
Penalty fee clause with provision for penalty for breach of confidentiality
This version applies to confidentiality breaches.
If a party breaches any confidentiality provisions of this Agreement, they will be liable for a penalty fee of [X] dollars for each breach. This fee will be charged in addition to any damages caused by the breach.
Penalty fee clause with provision for payment of penalties by a guarantor
This version applies if a guarantor is involved.
If [Party B] fails to perform its obligations, [Party A] may collect the penalty fees from the guarantor, who agrees to pay a penalty fee of [X] dollars for each day of non-performance, up to a maximum of [Y] dollars.
Penalty fee clause with provision for appeal of penalty
This version allows for the appeal of penalties.
If a penalty fee is assessed due to non-performance, the defaulting party may appeal the penalty by providing written notice and supporting documentation. [Party A] will review the appeal and may reduce or waive the penalty based on the evidence provided.
Penalty fee clause with provision for penalty on repeated breaches
This version applies a penalty for repeated breaches.
If [Party B] fails to perform its obligations under this Agreement more than once during the term, a penalty fee of [X] dollars will be assessed for each subsequent breach, in addition to the penalties for the initial breach.
Penalty fee clause with provision for deduction from payments
This version allows deduction from payments.
If any obligation under this Agreement is not performed by [Party B], [Party A] may deduct the applicable penalty fee from any payments owed to [Party B], including for future obligations under this Agreement.
Penalty fee clause with provision for third-party penalties
This version applies to third-party penalties.
If [Party B] fails to perform its obligations, [Party A] may impose a penalty fee of [X] dollars per day for each day of non-performance, and any third-party costs incurred as a result of the non-performance will be reimbursed by [Party B].
Penalty fee clause with provision for immediate penalty after default
This version applies an immediate penalty.
If [Party B] defaults on any obligation under this Agreement, an immediate penalty fee of [X] dollars will be assessed. This fee will be due immediately upon notification of the default.
Penalty fee clause with provision for maximum penalty cap
This version includes a maximum penalty cap.
The penalty for non-performance will be calculated at [X] dollars per day. However, the total penalty fee will not exceed [Y] dollars, regardless of the length of the delay.
Penalty fee clause with provision for refund of penalty upon performance
This version allows for the refund of the penalty.
If [Party B] successfully remedies the breach and performs its obligations within [X] days, [Party A] agrees to refund the penalty fee in full.
Penalty fee clause with provision for performance bond
This version includes a performance bond.
If [Party B] fails to perform its obligations, [Party A] may draw on the performance bond, which will be used to cover the penalty fees. The bond will be replenished by [Party B] within [X] days to maintain the bond's value.
Penalty fee clause with provision for non-payment penalties to be added to the total debt
This version adds penalties to the total debt.
If payment is not made within [X] days, a penalty fee of [X]% will be added to the total outstanding debt. This fee will continue to accrue on the overdue amount until paid in full.
Penalty fee clause with provision for adjustment based on delay duration
This version adjusts based on the delay duration.
If the performance delay extends beyond [X] days, the penalty fee will increase from [X] dollars per day to [Y] dollars per day. The penalty will apply for each day of non-performance.
Penalty fee clause with provision for delayed deliverables
This version applies to delayed deliverables.
If any deliverable under this Agreement is delayed by more than [X] days, a penalty fee of [X] dollars will be assessed per day of delay. This penalty will apply until the deliverable is provided in full.
Penalty fee clause with provision for missed milestones
This version applies to missed milestones.
If [Party B] fails to meet any project milestone by the agreed deadline, [Party B] will pay a penalty fee of [X] dollars for each day the milestone is overdue. This fee will be deducted from any payments due to [Party B].
Penalty fee clause with provision for agreed penalty rates
This version sets agreed penalty rates.
If any party fails to meet the agreed terms of performance, a penalty fee of [X] dollars will be applied for each instance of non-performance. The agreed rates are final and non-negotiable unless otherwise specified in this Agreement.
Penalty fee clause with provision for additional penalties for repeated breaches
This version increases penalties for repeated breaches.
If [Party B] commits a breach of contract more than once within [X] months, the penalty fee will be increased by [Y]% for each subsequent breach, up to a maximum of [Z] dollars per breach.
Penalty fee clause with provision for fixed late fee
This version applies a fixed late fee.
If any payment is not made within [X] days of the due date, a fixed late fee of [X] dollars will be charged. This fee will apply each time the payment is delayed, regardless of the amount overdue.
Penalty fee clause with provision for maximum annual penalties
This version sets a maximum annual penalty.
Penalty fees will be charged for each day of non-performance, but the total annual penalty will not exceed [X]% of the total value of this Agreement. This cap will apply even if the delay continues throughout the year.
Penalty fee clause with provision for immediate default penalty
This version includes an immediate penalty for default.
In the event of an immediate default, such as the failure to deliver required goods or services, [Party A] will charge a penalty fee of [X] dollars for the first day of non-performance. The fee will increase daily until the issue is resolved.
Penalty fee clause with provision for penalty based on overall contract value
This version calculates the penalty based on the contract value.
If non-performance occurs, the penalty will be calculated at [X]% of the total contract value for each day of delay. The penalty will apply until the non-performance is cured or the contract is terminated.
Penalty fee clause with provision for administrative fee deduction
This version allows administrative fee deductions.
If [Party B] fails to meet its obligations, an administrative penalty fee of [X] dollars will be deducted from the total amount due for the completed portion of the contract. The fee will apply each time a breach occurs.
Penalty fee clause with provision for damage recovery due to non-performance
This version applies for damage recovery.
If non-performance results in tangible damages to [Party A], [Party B] will be liable for a penalty fee equal to the costs incurred due to the failure to perform, in addition to any direct damages suffered by [Party A].
Penalty fee clause with provision for refund of penalties if delay is due to mutual agreement
This version allows for refund if mutually agreed.
If the delay in performance is mutually agreed upon by both parties and documented in writing, the penalty fee will be refunded. However, if the delay is unapproved, the penalty will remain applicable.
Penalty fee clause with provision for review of penalty based on performance
This version allows review of penalty.
If there is a delay or non-performance, the Parties may review the penalty fee based on the nature of the breach and the performance of the defaulting party. A modified penalty may be agreed upon based on this review.
Penalty fee clause with provision for refund for late service
This version applies to late service.
If [Party A] fails to perform the services within the agreed timeframe, [Party B] is entitled to a refund for the unfulfilled portion of the service. The refund will be calculated based on the portion of the service that was delayed.
Penalty fee clause with provision for monthly penalty
This version applies a monthly penalty.
If [Party B] fails to meet any milestone or deadline in this Agreement, a penalty fee of [X] dollars will be assessed monthly until the obligation is fulfilled, up to a maximum of [Y] dollars.
Penalty fee clause with provision for penalty for multiple breaches
This version applies for multiple breaches.
If [Party B] commits multiple breaches during the contract term, a penalty fee of [X] dollars will be applied for each additional breach. The penalty will increase after each subsequent violation.
Penalty fee clause with provision for late penalty based on contract value
This version applies to contract value.
In the event of a late performance, a penalty fee equal to [X]% of the contract value will be assessed for each day of delay. The penalty will apply to the entire value of the contract if performance is not completed.
Penalty fee clause with provision for refund for incomplete services
This version applies to incomplete services.
If [Party A] fails to deliver the agreed services in full, [Party B] will be entitled to a refund proportional to the services that were not provided. The amount refunded will be based on the percentage of incomplete work.
Penalty fee clause with provision for fixed penalty on failure to meet terms
This version applies a fixed penalty.
If [Party B] fails to meet any of the terms or conditions outlined in this Agreement, a fixed penalty of [X] dollars will be assessed for each day the breach continues, up to a maximum of [Y] dollars.
Penalty fee clause with provision for performance deadline extension
This version allows for an extension under certain conditions.
If [Party B] is unable to meet a performance deadline due to unforeseen circumstances, the deadline may be extended by [X] days without penalty. If the extension is exceeded, penalty fees of [X] dollars per day will be charged.
Penalty fee clause with provision for penalties based on work quality
This version applies penalties based on work quality.
If [Party B]'s performance fails to meet the standards specified in this Agreement, a penalty fee of [X] dollars will be charged for each instance of subpar performance, in addition to any corrective actions required.
Penalty fee clause with provision for penalty if deliverables are not met
This version applies if deliverables are not met.
If [Party A] fails to deliver the agreed-upon deliverables within the specified timeframe, a penalty fee of [X] dollars will be charged for each day the deliverables are delayed. This fee will be due immediately upon delivery.
Penalty fee clause with provision for penalties during the contract term
This version applies throughout the contract term.
During the term of this Agreement, a penalty fee of [X] dollars per day will be charged if any party fails to perform its obligations, starting from the date of non-performance until the performance is completed.
Penalty fee clause with provision for early termination penalties
This version applies if the contract is terminated early.
If either party terminates this Agreement early without cause, a penalty fee of [X] dollars will be assessed, in addition to any other damages incurred as a result of the termination.
Penalty fee clause with provision for delay in shipment
This version applies to delays in shipment.
If shipment is delayed by [Party A] beyond the agreed delivery date, a penalty fee of [X] dollars will be charged for each day the shipment is delayed, up to a maximum of [Y] dollars or [Z]% of the total contract value.
Penalty fee clause with provision for performance shortfall
This version applies to performance shortfall.
If [Party B] fails to meet the agreed performance standards, [Party A] reserves the right to impose a penalty fee of [X] dollars for each shortfall in performance. The penalty will apply for each performance deficiency identified.
Penalty fee clause with provision for waiver of penalties under certain conditions
This version allows for a waiver of penalties.
[Party A] may waive any penalty fees imposed due to non-performance if the defaulting party demonstrates that the failure to perform was due to factors beyond their control, such as force majeure, and the delay is cured within [X] days.
Penalty fee clause with provision for reduced penalty upon payment
This version reduces penalties if payment is made.
If [Party B] pays the overdue amount within [X] days of receiving notice of non-performance, the penalty fee will be reduced by [Y]%. If payment is made after [X] days, the full penalty fee will apply.
Penalty fee clause with provision for performance bonds in lieu of penalties
This version allows for a performance bond instead of penalties.
[Party B] may provide a performance bond in the amount of [X] dollars to guarantee timely performance. If the performance is delayed, the bond may be drawn to cover the penalty fees until the default is remedied.
Penalty fee clause with provision for reduced penalty upon corrective action
This version applies a reduced penalty if corrective action is taken.
If [Party B] takes immediate corrective action within [X] days of a breach, the penalty fee will be reduced to [Y]% of the original penalty amount. The corrective action must be verified by [Party A] before the reduced penalty is applied.
Penalty fee clause with provision for negotiated penalties
This version allows penalties to be negotiated.
If non-performance occurs, the Parties agree to negotiate the penalty fee in good faith. The negotiated penalty fee will reflect the impact of the non-performance and the efforts made to remedy the breach.
Penalty fee clause with provision for contract-specific penalty calculations
This version applies a contract-specific calculation.
The penalty for non-performance will be calculated based on the specific contract value and the severity of the breach. A fixed percentage of the total contract value, [X]%, will be applied for each day the breach continues.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.