Penalty

Penalty 

in civil law, a means of ensuring performance of obligations.

The penalty is a sum of money determined by law (legal penalty) or under contract (contract penalty) which the responsible party is obligated to pay if the obligation is not carried out or is carried out improperly. A penalty is paid for violation of contract conditions regarding time, quality, and method of per formance; it is recovered regardless of whether losses actually occur or how large such losses are.

According to Soviet law, the obligation to pay a penalty is supplementary (accessory) to the primary obligation. Any agreement concerning a penalty must be concluded in written form to be effective. The size and form of the penalty are determined by the nature of the violation of the original obligation. Imposed as a fine, the penalty is a fixed sum or definite percentage of the total unfulfilled or improperly fulfilled obligation. Fines are applied for violation of contract conditions regarding such elements as product quality, completeness of deliveries, efficient use of transport, and observance of the rules of documents transfer in the course of clearing accounts. A penalty is also paid for delay in performance of an obligation, whether for delay in turning over work or for delay in payment. The amount of such a penalty equals a fixed sum or a percentage of the value of the delayed performance, increasing with the duration of the delay.

Depending on the combination of losses and penalties recovered, the following types of penalties are distinguished: an offset penalty, discharged with the recovery of losses; an exclusive penalty, the collection of which excludes recovery of losses; a contract penalty, collected together with losses; and an alternative penalty, by which the aggrieved party has the right to demand recovery of either the penalty or actual losses.

The penalty is used to strengthen plan and contract discipline. The collection of penalties by socialist organizations is therefore viewed by the law not only as a right but also as a duty to the state. Payment of a penalty does not release the responsible party from performance of the obligation itself, with the exception of cases where the plan on which an obligation between socialist organizations was based is no longer in force.

E. G. POLONSKII

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Penalty 

(Russian penia, from the Latin poena, “punishment”), under Soviet civil law, a sum of money paid for each day of delay in the performance of an obligation or the imperfect performance of an obligation by a guilty party. It is calculated as a percentage of the sum of the unfulfilled or improperly performed obligation. Payment of the penalty does not release the debtor from the fulfillment of his obligation.