Contracts can appear straightforward until the point where someone fails to fulfil their obligations. In the case of property sales, the CPCV (Contrato-Promessa de Compra e Venda) is often signed with enthusiasm, a deposit is paid, and deadlines are set. But when one party defaults, the question quickly arises: what are the consequences?

This is where the penalty clause comes in for the CPCV. This clause serves to set, right from the contract, a penalty in case of non-compliance. Instead of leaving everything open, the parties define the amount or criterion for compensation in advance, reducing future discussions and making the risk more predictable.

In this article, you will understand how the penalty clause works in the CPCV, when it makes sense to include it, what amounts are usually used, and what precautions you should take to avoid turning protection into a source of conflict.

Uma cláusula penal num CPCV (Contrato-Promessa de Compra e Venda) é uma disposição contratual que estipula uma penalidade (geralmente financeira) a ser paga por uma das partes à outra, caso ocorra incumprimento das obrigações assumidas no contrato.

The penalty clause is a contractual provision that establishes an economic consequence for the breach of an obligation. In a Purchase and Sale Agreement for a Future Property (CPCV), it can be used to penalise delays, undue withdrawals, failure to appear at the deed, failure to deliver documents, or violation of duties undertaken by the parties.

In simple terms, it's a way of saying that if this obligation isn't met, the defaulting party pays a certain amount.

The big advantage is predictability. Instead of having to discuss the value of the loss later, the parties have already left a written reference in the contract.

However, be aware: a poorly drafted penalty clause can produce the exact opposite of what it promises. Instead of avoiding litigation, it creates uncertainty about when it applies, to whom it applies, and whether the amount is proportionate.

What is the purpose of the penalty clause in the CPCV?

The penalty clause in the CPCV has three main functions.

Before the list, it's worth noting the central idea: the penalty clause doesn't just exist to “punish”. It exists to create commitment.

• To exert pressure for compliance, because the party knows that failure has a cost.

• Settling compensation in advance, avoiding lengthy discussions about damages.

• Protecting the complying party when the other party's breach causes losses, delays, or lost opportunities.

In a property business, this is especially important because the values involved are high. A delay in the deed can compromise credit, moving, the sale of another property, building works, children's schooling or even a chain of interdependent businesses.

Penalty clause and deposit (or down payment): are they the same thing?

No. This is one of the most common confusions.

The deposit is a sum paid, normally by the buyer to the seller, at the time of signing the initial purchase agreement. It serves as a guarantee of the commitment and as an advance on the price. If the buyer defaults, they may lose the deposit. If the seller defaults, they may have to return the deposit twice over.

The penalty clause, in turn, is a penalty defined in the contract for certain breaches. It can exist alongside the deposit, but it must not be worded confusingly.

In practice, the preliminary purchase and sale agreement must make clear:

• If the penalty clause replaces the rule of the deposit.

• It is added to the signal.

• If it only applies to certain delays or breaches.

• Is fault required, or is objective non-performance sufficient?.

If you are assessing the impact of the signal on the contract, also read Home loan refused after preliminary contract: what happens to the deposit?, because the protection changes a lot according to the existing clauses.

A cláusula penal no CPCV (Contrato Promessa de Compra e Venda) faz sentido quando as partes pretendem garantir o cumprimento das obrigações assumidas e estabelecer de antemão uma compensação em caso de incumprimento. Em termos práticos, a sua inclusão é vantajosa nas seguintes situações: * **Para o Promitente Comprador:** Garante que, se o Promitente Vendedor desistir do negócio ou não cumprir a sua parte do acordo (por exemplo, não outorgar a escritura definitiva), este será penalizado e o comprador será indemnizado de forma pré-determinada, evitando a necessidade de provar todos os danos em tribunal. * **Para o Promitente Vendedor:** Garante que, se o Promitente Comprador desistir do negócio ou não cumprir as suas obrigações (por exemplo, não proceder ao pagamento do preço), este será penalizado. O valor da cláusula penal pode servir para compensar o promitente vendedor pelas despesas em que incorreu, pelo facto de o imóvel ter estado indisponível para venda durante o período do contrato promessa e por potenciais perdas de oportunidade de negócio. * **Reforço do Compromisso:** A existência de uma cláusula penal tende a aumentar o grau de seriedade e compromisso de ambas as partes com o contrato. Saber que haverá uma penalização em caso de incumprimento pode dissuadir desistências ou negligências. * **Simplificação em Caso de Incumprimento:** Em vez de ter de iniciar um processo judicial para provar os danos sofridos e o seu valor, as partes já têm um montante pré-acordado que será pago em caso de incumprimento. **É importante notar que:** * A cláusula penal não pode ser superior ao valor total da prestação, ou seja, ao preço acordado para a compra e venda. * Deve ser redigida de forma clara e inequívoca, especificando a obrigação cujo incumprimento vai gerar a penalização e o valor ou percentagem desta. * Geralmente, é proporcional ao valor do negócio e às expectativas comuns de despesas e lucros perdidos. Em suma, a cláusula penal no CPCV é um instrumento de garantia e liquidação prévia de danos, que confere maior segurança jurídica e tranquilidade às partes envolvidas na promessa de compra e venda.

Not all contracts require the same level of protection. However, there are situations where a well-drafted penalty clause can prevent serious problems.

Does it make sense to consider this clause when:

• The deadline for the deed is short and a delay could cause significant financial loss.

• There is early key handover.

• The buyer is reliant on a mortgage and deadlines are critical.

• The seller needs to vacate the property by a certain date.

• There are missing documents that need to be submitted before the deed.

• The business involves multiple heirs, power of attorney, or special conditions.

If the property has documentary themes or obligations to be met before the deed, the reading of Instructional documents in a preliminary sale and purchase agreement help to understand which documents should be checked before signing.

Typical values in a penalty clause in the CPCV

There is no universal value for the penalty clause in the CPCV. The value must be proportional to the transaction, the risk, and the type of breach you intend to prevent. In practice, one of three approaches is often found.

Fixed value

The clause defines a specific sum to be paid in case of breach.

Practical example: the party who unjustifiably misses the signing will pay €2,500 to the other party.

This solution is simple, but it must be adjusted to the value of the property. A penalty that is too low may have no effect. A penalty that is too high may be challenged.

Percentage of the price

The penalty is calculated as a percentage of the selling price.

Practical example: the defaulting party pays 2% of the agreed price.

This solution has the advantage of scaling with the size of the business. For a property of higher value, the penalty also increases.

Daily late fee

The clause provides for a penalty for each day of delay.

Practical example: for each day of unjustified delay in scheduling or executing the deed, the responsible party pays €100 per day.

This method can be useful when the problem is delay and not definitive withdrawal. Nevertheless, it's advisable to set a maximum limit to avoid disproportionate amounts.

What is a reasonable price?

Reasonableness depends on the context. A CPCV (Promissory Sale and Purchase Agreement) of €120,000 should not have the same penalty logic as a CPCV of €900,000. Nor is it the same to penalise a three-day delay or a total refusal to sign the deed.

As a practical reference, many contracts use:

• Moderate fixed penalties for simple delays.

• Percentages ranging from 1% to 5% of the price for material defaults.

• Daily values limited by the maximum ceiling when there is a delay in the writing or delivery of documents.

The most important thing is that the amount is justified. The penalty clause should protect, not crush. If the amount is clearly excessive, it may end up being disputed and reduced in court.

Penalty clause for delayed deed

One of the most common uses is delay in writing. Imagine that the CPCV sets a deadline, but one of the parties does not provide documents, does not appear, or does not cooperate with the scheduling.

In this case, the penalty clause may state that if the deed is not completed due to the fault of one of the parties, that party shall pay a penalty to the other.

But the wording must be careful.

Before applying a late payment penalty, the contract must make it clear:

• What is the deadline?.

• Who is obliged to sign the deed.

• What documents does each party have to submit?.

• The date of the deed is communicated as.

• What counts as a justifiable reason for postponement.

To better understand the difference between the promise and the final act, read Promissory Sale and Purchase Agreement (CPCV) and Public Deed of Sale and Purchase.

Penalty clause for a mortgage

When the buyer relies on financing, the penalty clause must be written with particular care. Otherwise, it could penalise the buyer for something they do not fully control.

If there is a mortgage, the preliminary purchase and sale agreement must link the penalty clause to:

• Financing approval condition.

• Bank's decision deadline.

• Buyer's obligation to deliver documents to the bank.

• Consequences if credit is declined.

• Proof of refusal or insufficient approval.

The typical error is to anticipate an automatic penalty for lack of notarisation, but to forget that the credit may be refused for banking or documentary reasons. To avoid this, consult Mortgage with a housing loan before finishing the essay.

Penalty clause and missing documents

There are contracts where the greatest risk isn't a lack of willingness. It's a lack of documentation.

This happens, for example, when it is missing:

• Licence to use.

• Energy Performance Certificate.

• Mortgage arrears.

• Consent of heirs or spouse.

• Regularisation of areas or records.

In these cases, the penalty clause can be used to hold the party liable who was supposed to deliver a specific document and did not do so within the deadline.

If the problem is the license, see Usage licence and preliminary purchase agreement: can I sign without a licence?. If the issue is the energy certificate, please read Energy performance certificate and preliminary sale agreement: is it mandatory?.

Penalty clause and encumbrance on the property

Another sensitive scenario is the existence of encumbrances or charges. A mortgage can be standard and addressed in the deed. A lien or usufruct may require much more caution.

The penalty clause can stipulate that the seller shall be penalised if they do not deliver the property free from encumbrances and charges on the agreed date, except for those expressly accepted by the buyer.

But, once again, it's not enough to write a generic sentence. The CPCV must identify:

• What burdens exist.

• Who has the obligation to cancel them.

• Until when.

• What proof must be presented?.

• What happens if the cancellation doesn't occur.

Before signing, it makes sense to confirm everything through the guide. How to check for encumbrances and charges before signing a preliminary purchase agreement (CPCV)?.

Yes, a penalty clause can apply to both parties.

Yes, and often there should be.

A balanced CPCV should not protect only the seller or the buyer. It should protect the completion of the deal. The buyer may fail due to lack of financing, unjustified delay, or withdrawal. The seller may fail due to failure to deliver documents, failure to cancel a mortgage, selling to a third party, or failure to attend the deed.

Therefore, the penalty clause can be bilateral, with equivalent penalties or penalties adjusted to the type of obligation of each party.

The essential thing is to avoid unbalanced clauses that seem designed to benefit only one party without proportional reason.

Can the penalty clause be reduced by the court?

Yes, in certain cases. If the penalty clause is manifestly excessive, it can be reduced. This is important because some people think that just writing any amount in the contract means that amount will be automatically untouchable.

In practice, a very exaggerated penalty clause can lead to disputes. The judge can assess whether the penalty is disproportionate to the contract value, the type of breach, and the foreseeable damages.

Therefore, the best penalty clause is not the most aggressive one. It is the most defensible.

How to draft a good penalty clause in a CPCV?

A good penalty clause should be clear, proportionate, and easy to apply.

Before the list, remember this rule: a penalty clause is only useful if, at the time of the conflict, everyone knows exactly when it applies.

It must indicate which obligation is protected, who pays the penalty, its amount or calculation formula, when the penalty is enforceable, whether there is a grace period, if there is a maximum limit, whether the penalty replaces or is in addition to other compensation, and how it is articulated with the deposit.

If you intend to review the basic structure of the contract, please read Mandatory clauses of the CPCV.

Common mistakes to avoid

There are errors that appear repeatedly in preliminary contracts and which can weaken the penalty clause.

Before proceeding, please confirm that you do not fall into these problems:

• Price too high without justification.

• Penalty applicable to any delay, even if justified.

• Lack of distinction between delay and definitive breach of contract.

• Contradiction between penalty clause and deposit.

• Absence of proof and method of communication.

• Penalty for only one party, no contractual balance.

If you are in the final stages before signing, read on. Precautions to take before signing a preliminary purchase and sale agreement to confirm whether the contract is indeed ready.

A simple example of penalty clause logic

An effective penalty clause doesn't need heavy-handed language. It needs precision.

The logic could be this:

• There is a deadline for the deed.

• The party that, without justified reason, prevents the completion of the deed on that date shall pay a specific penalty.

• If the delay continues, there may be a daily penalty up to a certain limit.

• If the breach becomes definitive, the consequences of the deposit or any other expressly provided rule shall apply.

This example does not replace professional writing, but shows the essentials: obligation, fault, value, deadline, and consequence.

Conclusion

The penalty clause in a CPCV acts as a contractual safety net. It doesn't prevent all problems, but it makes the consequences more predictable when someone fails. It can be used for delays, lack of documents, failure to execute the deed, late delivery of the property, or other relevant obligations.

Typical values vary according to risk: they can be fixed amounts, percentages of the price, or daily penalties with a maximum limit. The secret lies in proportionality. A weak penalty clause will not deter anyone. An exaggerated clause may end up being disputed and reduced.

If you are negotiating a preliminary purchase agreement with a high deposit, a mortgage, short deadlines or pending documents, speak to a Solicitor. A well-drafted penalty clause can be the difference between resolving a dispute in days or dragging out a problem for years.