# Penalty Clause Agreement
**This Penalty Clause Agreement ("Agreement") is made and entered into as of [Date], by and between:**
**[Party A Name]**
[Address]
[City, State, Zip Code]
(Hereinafter referred to as "Party A")
**AND**
**[Party B Name]**
[Address]
[City, State, Zip Code]
(Hereinafter referred to as "Party B")
### Recitals
WHEREAS, Party A and Party B have entered into a contract dated [Original Contract Date] (the "Original Contract"); and
WHEREAS, both parties wish to include a penalty clause that outlines the consequences of defaulting on their obligations under the Original Contract.
NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein, the parties agree as follows:
### 1. Penalty for Non-Performance
1.1 **Non-Performance Definition**
For the purposes of this Agreement, "Non-Performance" shall mean the failure of either party to adhere to the material terms and conditions set forth in the Original Contract, including, but not limited to, timelines, deliverables, and payment obligations.
1.2 **Penalty Amount**
In the event of Non-Performance, the defaulting party shall pay the non-defaulting party a penalty in the amount of [Specify Amount] or [Specify Percentage]% of the total contract value, whichever is greater.
### 2. Notification of Default
2.1 **Written Notification**
The non-defaulting party must provide written notification to the defaulting party of the occurrence of Non-Performance within [Specify Time Period, e.g., 10 days] of discovering such Non-Performance.
2.2 **Cure Period**
Upon receipt of the written notification, the defaulting party shall have [Specify Cure Period, e.g., 30 days] to remedy the Non-Performance before the penalty shall apply.
### 3. Payment of Penalty
3.1 **Due Date**
The penalty amount shall be due and payable within [Specify Time Period, e.g., 15 days] after the lapse of the Cure Period if the Non-Performance has not been remedied.
3.2 **Method of Payment**
All payments due under this Agreement shall be made in [Specify Currency], via [Specify Payment Method, e.g., wire transfer, check].
### 4. Limitation of Liability
4.1 **Exclusion of Consequential Damages**
Neither party shall be liable to the other for any indirect, incidental, or consequential damages arising from Non-Performance.
### 5. Miscellaneous
5.1 **Governing Law**
This Agreement shall be governed by and construed in accordance with the laws of [State/Country].
5.2 **Entire Agreement**
This Agreement constitutes the entire understanding between the parties concerning the subject matter hereof and supersedes any prior agreements or understandings.
5.3 **Amendment**
This Agreement may only be amended or modified in writing signed by both parties.
5.4 **Severability**
If any provision of this Agreement is held to be invalid, illegal, or unenforceable, the remaining provisions shall remain in full force and effect.
### IN WITNESS WHEREOF, the parties hereto have executed this Penalty Clause Agreement as of the date first above written.
**[Party A Name]**
______________________________
(Signature)
[Name]
[Title]
**[Party B Name]**
______________________________
(Signature)
[Name]
[Title]
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**Note:** This document serves merely as a template and should be customized to meet specific contractual needs. It is advisable to consult with a qualified attorney before executing any legal agreements.