Penalty Clauses: A Comparative Analysis between the Turkish and Ethiopian Laws

Abstract

Both the Ethiopian Civil Code and the Turkish Code of Obligation recognized party autonomy to agree a penalty clause either as an ex-ante estimation of a possible damage from non-performance of an obligation or as a sanction for default. But, despite the fact that both countries adhered to the continental legal system, there are considerable differences between the two regarding the regulation of penalty clauses. The paper examines the regulation of penalty clauses in legal literature as well as the laws of the two countries. It, in particular, analyses the two laws on the type of principal obligations that can be secured by penalty clauses, the possibility of claiming the enforcement of both the contract and the penalty, the relation between fault of the debtor & damaged suffered by the creditor on one hand and the enforcement of the agreed penalty on the other hand as well as possible court intervention in altering the free wills of the parties. A comparative approach is used throughout the paper in which the differences and similarities of the two systems are examined.