Facts
This judgment dealt with a lawsuit filed by Sidomat-Automaten AG against Seiler. Sidomat-Automaten AG had concluded a contract with Seiler that included a contractual penalty. When Seiler failed to fulfill the contract, Sidomat-Automaten AG demanded the contractual penalty. Seiler argued that the contractual penalty was excessive and should therefore be reduced.
In this case, the Federal Supreme Court had to decide under what conditions a contractual penalty can be considered excessive and reduced.
Considerations
According to Article 161, paragraph 1 of the Swiss Code of Obligations (OR), the contractual penalty is owed even if the creditor has not suffered any damage. It is therefore forfeited even if the damage is difficult to quantify or cannot be proven at all. The purpose of the contractual penalty is to relieve the creditor of this burden of proof.
According to the case law of the Federal Supreme Court and legal doctrine, a reduction of the contractual penalty is justified in particular if there is a gross disproportion between the contractual penalty and the creditor's interest in performance. The specific circumstances of the individual case must be taken into account, such as the nature and duration of the contract, the fault of the obligated party, the economic situation of the parties, and the severity of the breach of contract.
The Federal Supreme Court clarified that in examining whether a disproportion exists and the penalty should therefore be…