- 156. Definition of earnest money
(1) Earnest money is a sum of money given by one party to a contract to the other party to certify that the contract has been entered into and to secure the performance thereof.
(2) Upon performance of a contract secured with earnest money, it is presumed that the earnest money will be used towards performance of the obligation or, if performance is impossible, that the earnest money will be refunded.
- 157. Consequences of non-performance of contract secured with earnest money
(1) If the non-performance of a contract secured with earnest money is the fault of the party which gave the earnest money, the other party shall retain the earnest money. If the party which receives the earnest money requires compensation for the damage incurred by the party due to non-performance of the contract, the earnest money shall be used towards such compensation.
(2) If a contract secured with earnest money is not performed for a reason other than the fault of the party which gave the earnest money, the party may require the earnest money to be refunded.
- 158. Definition of contractual penalty
(1) A contractual penalty is an obligation which is prescribed in the contract and under which the party which fails to perform the contract undertakes to pay an amount of money determined by the contract to the injured party.
(2) The provisions concerning contractual penalties also apply to acts which a non-performing party must perform in the interests of the injured party.
(3) The provisions of this Division apply mutatis mutandis in cases where the parties have agreed in advance on the amount of the damage to be compensated for by the non-performing party.
- 159. Contractual penalty and claim for performance of obligation
(1) If a contractual penalty is agreed upon for the occasion of non-performance of an obligation, the injured party may claim performance of the obligation in addition to payment of the contractual penalty. Performance of the obligation in addition to payment of a contractual penalty shall not be claimed if the contractual penalty was agreed upon as a substituted performance and not as a measure for achieving performance.
(2) An injured party loses the right to claim payment of a contractual penalty if the party fails to notify the other party during a reasonable period after becoming aware of the non-performance that the party is claiming payment of the contractual penalty.
[RT I 2003, 78, 523 – entry into force 27.12.2003]
- 160. Contractual penalty in case of excused non-performance
If non-performance of an obligation is excused, payment of a contractual penalty shall not be claimed unless otherwise prescribed by the contract.
- 161. Contractual penalty and damage
(1) In the case of non-performance of a contract, the injured party may claim payment of a contractual penalty regardless of the actual damage.
(2) If an injured party has the right to claim compensation for damage incurred due to non-performance of the contract, compensation shall be paid to the extent not covered by the contractual penalty.
- 162. Reduction of contractual penalty
(1) If a contractual penalty to be paid is unreasonably high, the court may reduce the penalty to a reasonable amount at the request of the party obligated to pay the penalty, taking into particular account the extent to which the obligation has been performed by the party, the legitimate interests of the other party and the economic situation of the parties.
(2) Agreements which derogate from the provisions of subsection (1) of this section to the detriment of the party obligated to pay a contractual penalty are void.
(3) A party obligated to pay a contractual penalty does not have the right to require a reduction of the penalty after the party has paid the penalty.
- 163. Contractual penalty if contract is void
If a contract is void, agreements concerning the payment of contractual penalties are also void.