The UK Supreme Court has recently clarified the English (and Scottish) law on penalties in the (joint) appeals in Cavendish Square Holding BV v Talal El Makdessi (“Cavendish”) and ParkingEye Ltd v Beavis [2015] UKSC 67 (“ParkingEye”). The Supreme Court resisted calls to abolish the rule against penalties altogether, or at least in relation to commercial transactions, and confirmed that the existing law on penalties remains good law. However, their Lordships clarified that the correct test for determining whether a provision is penal is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party’s interest in the performance of the contract (per Lord Hodge). In clarifying the correct test in those terms, their Lordships emphasised that such test does not reflect, if it ever did, a mutual exclusivity between a penalty and a genuine pre-estimate of loss. The Supreme Court also confirmed that the rule against penalties applies to forfeiture clauses.