Kuwait Court of Cassation principle number 2420

The penalty clause lapses upon the lapse of the principal obligation. The reason: it is an obligation accessory to the latter. - The contracting parties’ determination of the amount of compensation in the event of rescission of the contract. Liability resulting from this rescission. Tortious. Compensation therefor is determined by a penalty clause. - 447 - Obligation - The penalty clause applies to contractual and tortious liability. - Rescission of the contract extinguishes the penalty clause contained therein. Its implication: the judge may assess compensation against the contracting party in default of his obligation. An example of rescission of a car sale contract by instalments for failure to pay the instalments, and the court’s assessment of the amount of compensation and its order requiring the female purchaser to pay it.