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Hong Kong
Leading Case
cavendish testprimary vs secondary obligationliquidated damagespayment in lieu
Law Ting Pong Secondary School v Chen Wai Wah
[2021] HKCA 873
Key Principle
Hong Kong adopts the modern Cavendish penalty test: a clause is penal only if it imposes a secondary obligation on breach that is out of all proportion to the innocent party's legitimate interest; primary obligations (e.g. payment in lieu of notice) do not engage the penalty rule.
Area of Law
Contract & Commercial
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