127 Hobson Street Ltd v Honey Bees Preschool Ltd: The Penalties Doctrine, Signalling and the Balancing of Legitimate Interests

Research output: Contribution to journalArticle

Abstract

In 127 Hobson Street Ltd v Honey Bees Preschool Ltd [2020] NZSC 53 the Supreme Court of New Zealand became the latest final appellate court to endorse the legitimate function approach to determine whether or not an agreed contractual remedy is a penalty. In doing so the Court drew heavily on what it saw as the “persuasive” recent developments in England and Australia. This article draws on the English and Australian experiences in order to provide a brief commentary on the merits and limitations of the Supreme Court’s decision. In a conclusion that will be unsatisfying to contract law purists, this article argues that it is possible that the modern law of penalties ultimately has settled on a messy, but welcome, compromise. That compromise being that contracting parties are granted increasingly wide powers to agree remedies, albeit in circumstances where some of the key benefits of having a penalties doctrine are retained.
Original languageEnglish
JournalNew Zealand Universities Law Review
Volume29
Issue number2
Publication statusPublished - 1 Dec 2020

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