ABSTRACT
The penalty doctrine, which denies enforcement to oppressive remedy clauses, is alive and well in Canada. I demonstrate this with a review of decisions from all common law provinces. I then defend two claims about the doctrine. First, the penalty doctrine fills a role that bargaining unconscionability – the combination of procedural and substantive unfairness – cannot. Because remedy clauses only trigger on the future contingency of breach, applying unconscionability to remedy clauses would require impracticable probabilistic calculations, which I describe. Second, the doctrine should distinguish between what I call ‘heaps’ and ‘schemes’ – that is, between clauses that seek to compensate for loss and clauses designed to uphold a punitive scheme without regard to loss. Heaps and schemes both need a special rule, but raise distinct policy issues.
John Enman-Beech, The Penalty Doctrine in Canada (2021) 99 Canadian Bar Review 504.
First posted 2021-12-16 14:00:12
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