Non-penalty Clause in a Contract

In addition to option clause and penalty clause in a contract, some other conditions may be included in contracts that can be regarded as non-penalty clause. This clause, from one hand, is related to requirements regarding damages, such as penalty clause, limitation of liability and non-liability requirements and from the other hand to requirements regarding rescission. Under this clause, obligor may refuse to perform the obligation and rescind the contract. However, in exchange, as the case may be, he/she must pay damages to the other party. This clause is different from the penalty clause because it aims to establish the right to fail to perform and in fact the right to termination. Accordingly, non-penalty clause involves some option clause whose duration needs to be specified. This term may be expressed or implied. This article deals with different aspects of such clauses.