Abusiveness

A community of property owners contracted with a company for the maintenance of their elevators . The contract included a clause stating that if the community terminated the contract before it ended (without the company having breached anything), it had to pay the company half of the remaining amount due until the end.

After losing trust in the company, the community decided to terminate the contract early. The company then demanded payment as agreed, that is, 50% of the fees that would have been due until the end of the contract, arguing that the penalty clause should be enforced.

In the first trial, the court dismissed the company's claim and declared the clause null and void for being considered abusive, as it imposed a very high penalty without the company proving that it had actually suffered damage in that amount.

However, the Provincial Court ruled in favor of the company and deemed the clause valid, based on the freedom that parties have to agree to whatever they wish and considering that the contract duration (two years) was not excessive.

Not satisfied, the community appealed to the Supreme Court (SC), which has reversed the decision. Remember that, even if the contract lasts for a reasonable time and the agreed penalties are not automatically abusive, it is necessary to verify always that the amount demanded actually corresponds to damage caused. In this case, the compensation of 50% of the outstanding installments has been set without demonstrating that this percentage compensates for a real harm; therefore, it is considered excessive , acting more as a threat than as reasonable compensation.

For all these reasons, the SC estimates the community's appeal, declares the penalty clause abusive and void , and concludes that such a high payment cannot be demanded without proving an actual damage.