cannot know what Cavendish would have paid without the assurance of the Sellers’ loyalty, even assuming that they would have bought the business at all.” A similar analysis applied to clause 5.6, which was a primary obligation to sell the shares at a lower price. Whilst the clause excluded goodwill from the calculation of the payment price in the event of a breach of the restrictive covenants and, therefore, did not represent the estimated loss attributable to that breach, it did reflect the reduced purchase price which Cavendish would have been prepared to pay on the basis that they could not count on the loyalty of Mr Makdessi. In ParkingEye Ltd v Beavis, the Supreme Court held that Mr Beavis had a contractual licence to park in the car park on the terms of the notices put up around the car park, including the two hour limit. The GBP 85 was a charge for breaching the terms of that contractual licence. This is a common scheme, subject to indirect regulation by statute and the British Parking Association’s Code of Practice. The Court held that, whilst the penalty rule was engaged in this case, the GBP 85 charge was not a penalty. The charge protected two legitimate business interests: (a) the efficient use of the car park, which benefited the Retail Park’s shops and customers by deterring long-stay or commuter traffic; and (b) the
generation of income in order to run the scheme, which benefited ParkingEye. These interests extended beyond the recovery of any loss; and the charge was no higher than was necessary to fulfil those interests. What implications do these decisions have? The penalty rule is long established, and has perhaps diminished in importance in light of statutory regulation, such as the 1999 Regulations. However, in these two cases, the Supreme Court observed that the rule is also common to many developed systems of law, and covers contracts not regulated by statute, such as non-consumer contracts. The rule is also consistent with other, well established principles developed by judges that involve the Court declining to give full force to contractual provisions, such as relief from forfeiture, equity of redemption and refusal to grant specific performance.
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