This paper will only analyze one issue; namely whether the inclusion
of penalty clauses or fixed sums into a contract is governed by the
Convention of International Sale of Goods (CISG)1 and, therefore, falls
inter alia under Article 74. In essence, a penalty clause or fixed sum is a
pre-determined amount of money which becomes due in the event of a
breach of contract. The word “penalty” is used in this paper to describe
the fact that the amount due is greater than the actual damage. The main
reasons to include penalty clauses in contracts are to “reduce legal costs,
[to provide] time for producing evidence, and [to mitigate] the risk of
losing litigation or arbitral proceedings due to the required level of proof not being met.