From Longman Dictionary of Contemporary Englishpenalty clauseˈpenalty ˌclause noun [countable] BETBthe part of a contract which says what someone will have to pay or do if they do not obey the agreement, for example if they do not complete work on time
Examples from the Corpus
penalty clause• The defendants were liable to a penalty clause in the main contract if the work was not completed on time.• The owners of the dredger required it to complete a contract which contained an onerous penalty clause.• She knew she would feel a good deal less proud when she told Alice about the penalty clause.• How if at all did the existence of the penalty clause affect the consideration given by the plaintiff?From Longman Business Dictionarypenalty clauseˈpenalty ˌclause COMMERCELAWa condition in a contract that says what will happen if one of the people or organizations involved does not do what the contract states they shouldThe defendants were liable to a penalty clause in the main contract if the work was not completed on time. → clause 