Cavendish Square Holding BV v El Makdessi, ParkingEye Ltd v Beavis [2015] UKSC 67

Facts

  • The case combined appeals in Cavendish Square Holding BV v El Makdessi and ParkingEye Ltd v Beavis, both addressing the enforceability of alleged penalty clauses.
  • In Cavendish v El Makdessi, Cavendish purchased a controlling interest in a marketing business from El Makdessi, with a non-compete covenant restricting El Makdessi from competing. Breach would forfeit final purchase installments and allow Cavendish to force the sale of remaining shares at a discounted rate.
  • El Makdessi breached the non-compete clause, and Cavendish sought to enforce these consequences; El Makdessi claimed the clauses were unenforceable penalties.
  • In ParkingEye v Beavis, ParkingEye operated a retail car park allowing two hours’ free parking, after which an £85 charge was imposed for overstaying. Beavis exceeded the time limit and was issued the charge, which he argued was an unenforceable penalty.
  • Both cases explored whether the given clauses were penal and thus unenforceable under contract law.

Issues

  1. Whether the contractual clauses in both cases constituted unenforceable penalties under the traditional rule.
  2. What the appropriate legal test is for determining if a clause is penal.
  3. Whether the clauses in both the Cavendish and ParkingEye cases satisfied the requirements of the penalty rule as reformulated.

Decision

  • The Supreme Court established a new test for penalty clauses, focusing on whether the detriment imposed is out of proportion to any legitimate interest of the innocent party beyond compensation.
  • The clauses in Cavendish v El Makdessi were upheld; the Court found Cavendish’s interests in protecting goodwill justified the consequences for breach.
  • The £85 parking charge in ParkingEye v Beavis was also upheld; the Court found ParkingEye had a legitimate interest in regulating parking and ensuring space availability, making the charge proportionate.
  • The Court departed from the traditional focus on genuine pre-estimate of loss, adopting a broader, more commercial approach.

Legal Principles

  • The penalty rule renders unenforceable any clause that imposes a detriment on the contract-breaker that is out of all proportion to the innocent party’s legitimate interest.
  • Legitimate interests can extend beyond financial compensation and include broader commercial objectives.
  • The proportionality of the clause to the legitimate interest is the central question; unconscionable or extravagant clauses remain unenforceable.
  • Courts should generally not interfere with clauses freely agreed between parties of comparable bargaining strength.

Conclusion

The Supreme Court in Cavendish and ParkingEye clarified and reformulated the penalty rule in English contract law, allowing enforcement of clauses proportionate to a party’s legitimate commercial interests and establishing that protection against penalties is limited to cases where clauses are unconscionable or grossly disproportionate.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal