Unreasonable amount of contractual penalty and possibilities of its moderation in appeal proceedings

Posted by: 10. 8. 2025
Update: 10/8/2025

The approach to moderation (reduction) of excessive contractual penalties by the courts has recently undergone significant development. The fundamental decision was the judgment of the Supreme Court of 11. 1. 2023, file no.. 31 Cdo 2273/2022, which established a different approach to the moderation of an unreasonable contractual penalty. This decision is followed by the recent judgment of the Supreme Court of 22 May 5, file no. 23 Cdo 767/2024, which addresses the question of the possibility raising an objection to the unreasonable amount of the contractual penalty only in the appeal proceedingsThis article will be devoted to this decision.

Generally on the possibilities of reducing the unreasonable amount of the contractual penalty

The current case law of the Supreme Court approaches the moderation of the contractual penalty in such a way that it is the adequacy of the amount of a specific claim is examined in relation to the contractual penalty, in order to prevent the creditor from being awarded an unreasonably high contractual penalty that would not correspond to the specific interests of the parties in connection with the claim in question. At the same time, when assessing the proportionality of the claim from the contractual penalty, account must also be taken of function of this contractual penalty, which corresponds to the interests of the parties and best pursues its purpose.

For the use of moderation of contractual penalties burdens the debtor jak the burden of proof as well as the burden of assertion, where the debtor must claim and prove that the contractual penalty is unreasonable and that it should be reduced by the court.

Moderation of contractual penalty in appeal proceedings

The above-mentioned approach to the moderation of contractual penalties and other related case law is also followed by the aforementioned judgment of the Supreme Court, which dealt with possibility of raising an objection to the moderation of the contractual penalty in the appeal proceedings, in the system incomplete appeals, which is based on the principle that new facts and evidence that could have been presented before the court of first instance cannot be used in the appeal proceedings.

Regarding the given problem, the Supreme Court stated that this objection can be raised in the appeal proceedings, however, it cannot be based on facts and evidence, which could have been applied in proceedings before the court of first instance. The opposite approach would be contrary to the nature of an incomplete appeal and the principles on which this system is built.

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The above decision adds another aspect to the moderation of an unreasonable contractual penalty, which may have a significant impact on practice in the context of choosing an appropriate procedural strategy with regard to raising an objection of unreasonableness of the contractual penalty and a request for its reduction.

Source: Leagle.One

Often, the contractual penalty is almost as high as the debt itself. What to do with an unreasonable amount of contractual penalty? Under what circumstances is it possible to request a reduction of the contractual penalty in court? Does this apply to your case? Contact us and we will help you with everything!