A penalty provision specifies a certain amount to be paid in the event of a default or breach of contract.

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A penalty provision is a common feature in contracts that specifies a pre-determined amount that will be paid by the party in default in the event of a breach or default of the contract. The purpose of a penalty provision is to provide a disincentive for parties to breach the agreement and to compensate the non-breaching party for any losses incurred as a result of the breach.

A Penalty Provision Specifies a Certain Amount to Be Paid