Penalty Clause

A penalty clause is a predetermined sum that the debtor undertakes to pay the creditor where a contractual obligation is not performed at all, is not performed properly, or is performed late. The delay penalties, penalties for breach and financial sanctions, and penalties claimed on termination of the contract provided for in Public Procurement Contracts Law No. 4735 and its secondary legislation are a particular form of the penalty clause under the Code of Obligations. It is one of the principal legal bases for calculating termination, compensation and progress payment deductions.