Contractual Penalty Versus Lump-Sum Damages Interpretation

The case concerned the interpretation of a contractual clause from 2005 regarding the consequences of breaching the agreement, specifically whether the stipulated payment constituted a contractual penalty (Konventionalstrafe) or a lump-sum damages payment (Schadenspauschale). The court reasoned that a contractual penalty aims to secure the primary obligation and carries a punitive function, being due upon breach regardless of proven damage, though fault must be shown; conversely, a lump-sum damages payment requires proof of damage and lacks a punitive element. Analyzing the clause, which mandated a payment of ten percent of business volume, with a minimum of CHF 10,000, for any violation, the court determined that because this amount was due for various breaches identically, irrespective of actual loss, and was intended to enforce loyalty, the parties intended to establish a contractual penalty, notwithstanding the use of the term "Schadenersatz" (damages).