Contractual Penalty Clause Enforcement vs. Judicial Modification

A party sought to enforce a contract provision stipulating a penalty for late performance against the debtor who failed to meet the deadline; however, the court of appeal, in upholding the debtor's claim, found that the agreed-upon penalty clause constituted an indémnité forfaitaire (fixed compensation) that could not be modified unless the creditor could prove that the actual prejudice suffered was substantially greater than the stipulated amount, which was not the case here. The high court quashed this decision, reasoning that according to the applicable civil code article, a contractual penalty clause, unless specifically designated as a simple penalty, must be executed fully by the judge, who is prohibited from reducing or increasing the agreed-upon amount, even if the actual damage is perceived to be different from the stipulated sum.