I’ve been given the question below, and I need to advise Defyn on his legal position regarding each contract.

I’m fairly certain I’ve cracked contract 1 with GF - and that the clause stated is a penalty clause, not a liquidated damages clause, and therefor it isn’t enforceable....

The amount payable doesn’t vary regardless of how many stores he fails to deliver to, therefore how can it possibly be a genuine pre estimate of losses due to breach?

Am I right in thinking this?

Thank you in advance 😊

Defyn is the owner of a business that produces ready meals for a number of high-street shops. Defyn has recently been approached by an international supermarket chain, Global Foods Ltd (GF). GF want to purchase Defyn’s ready meals for the next 5 years. This contract is worth £100,000 a year. Over the next 5 years this will be worth £500,000. Defyn is keen to enter in to this contract and reads through GF’s terms and conditions. He is a bit concerned about clause 10 in the contract which states:

The supplier [Defyn] of the ready meals will deliver an order of 250 ready meals to each of our ten supermarkets in the UK. All deliveries must be made no later than 5pm on the 25th day of each month starting from the 25th January 2020. Failure to deliver these orders within the stipulated time, to each of our supermarkets in the UK, will require the supplier [Defyn] to pay a late delivery fee of £500 per day whether delivery to one store or all ten stores is delayed.

Defyn is keen to take on this new business as he feels it is a once in a lifetime opportunity and signs the contract.