Cavendish Square BV v Makdessi and ParkingEye Ltd v Beavis [2015]

Cavendish Square BV v Makdessi and ParkingEye Ltd v Beavis [2015] UKSC 67 is a significant conjoined case in English contract law that dealt with the validity of penalty clauses. The UK Supreme Court, in its ruling on November 4, 2015, updated the established legal rule on penalty clauses, replacing the traditional genuine pre-estimate of loss test with a new test. The new test evaluates whether a clause imposes a detriment that is out of proportion to any legitimate interest of the innocent party.

Cavendish Square Holding BV v Talal El Makdessi
The case involved a sale and purchase agreement between Mr El Makdessi and Cavendish. The agreement included clauses prohibiting competitive activities and specified consequences, such as the loss of interim and final payments, if these clauses were breached. Mr El Makdessi admitted to breaching the non-competition clause. The Supreme Court, by a majority, held that the clauses in the Cavendish case were not penalties. The new test for penalty clauses is whether the provision is a secondary obligation imposing a detriment out of proportion to any legitimate interest of the innocent party. The court emphasised that the penalty rule is an interference with freedom of contract and should not be applied too stringently.

ParkingEye Ltd v Beavis
Mr Beavis parked in a retail shopping car park with a sign indicating a 2-hour maximum stay and an £85 penalty for non-compliance. Mr Beavis overstayed by 56 minutes and challenged the penalty as unenforceable. The Supreme Court, by a majority, held that the £85 charge was not an unlawful penalty. The new test for penalty clauses applies, considering whether the provision imposes a detriment out of proportion to any legitimate interest of the innocent party. The court found that the charge was not unfair under the Unfair Terms in Consumer Contracts Directive.

The cases clarified the law on penalty clauses, moving away from the strict genuine pre-estimate of loss test. The new test focuses on whether the detriment is proportionate to the innocent party's legitimate interest. The court emphasised the importance of freedom of contract and the need to avoid setting too stringent standards. It became more challenging for parties to challenge the validity of liquidated damages provisions, especially when negotiated by parties on a level playing field with professional advisors.

The judgment in Cavendish also had implications for equitable relief from forfeiture. Relief may be available for contractual provisions, such as forfeiture clauses, if the forfeiture is not wholly disproportionate. The court may consider granting relief from forfeiture after determining the clause is not a penalty, taking into account the circumstances of the breach and the parties' positions.

In summary, the cases provided welcome clarification to the law but also introduced some uncertainty. The new test made it harder for parties paying liquidated damages to challenge their validity in negotiated contracts. Relief from forfeiture could be extended to contractual provisions, and the court could consider both the penalty doctrine and equitable relief in such cases.
Back to blog
UOLLB SQE Turbocharge

UOLLB SQE Turbocharge

Get ready for the SQE1 with high-performance SQE Study Guides developed by UOLLB and published by UOL Press to revolutionise your study method and exam strategy.

Turbocharge SQE Performance Here

UOL Case Bank

Upon joining, you become a valuable UOL student and gain instant access to over 2,100 essential case summaries. UOL Case Bank is constantly expanding.
Speed up your revision with us now👇

Subscribe Now

Where are our students from?

Council of Europe
Crown Prosecution Service
Baker Mckenzie 
Yale University
University of Chicago
Columbia University
New York University
University of Michigan 
INSEAD
University of London
University College London (UCL)
London School of Economics (LSE)
King’s College London (KCL)
Royal Holloway, University of London 
Birkbeck, University of London
SOAS, University of London
University of Manchester
University of Zurich
University of York
Brandeis University
University of Exeter
University of Sheffield
Boston University
University of Washington
University of Leeds
University of Law
University of Kent
University of Hull
Queen’s University Belfast
Toronto Metropolitan University
Hong Kong University of Science and Technology
University of Buckingham
ESSEC Business School

  • Criminal Practice

    Diagrams and Charts

    Our carefully designed diagrams and charts will guide you through complex legal issues.

  • Criminal Law

    Clear and Succinct Definitions

    Key concepts are concisely defined to help you understand legal topics quickly.

  • Property Law

    Statutory Provisions

    Statutory provisions are provided side by side with legal concepts to help you swiftly locate the relevant legislation.

  • Public Law

    Case Summaries

    We have summarised important cases for you so that you don't need to read long and boring cases.

  • Evidence

    Rules and Exceptions

    Rules and exceptions are clearly listed so that you know when a rule applies and when it doesn't.

  • Company Law

    Terminology

    Legal terms and key concepts are explained at the beginning of each chapter to help you learn efficiently.

  • Case Law

    Case law is provided side by side with legal concepts so that you know how legal principles and precedents were established.

  • Law Exam Guide

    Law Essay Guide

    You will learn essential law exam skills and essay writing techniques that are not taught in class.

  • Law Exam Guide

    Problem Question Guide

    We will show you how to answer problem questions step by step to achieve first-class results.

  • Conflict of Laws

    Structured Explanations

    Complex legal concepts are broken down into concise and digestible bullet point explanations.

  • Legal System and Method

    Legal Research

    You will learn legal research techniques with our study guide and become a proficient legal researcher.

  • Jurisprudence and Legal Theory

    Exam-focused

    All essential concepts, principles, and case law are included so that you can answer exam questions quickly.