The object of this work is to consider the importance of the purpose attached to such clauses as liquidated damages, penalties and forfeiture. Such clauses are common for example in contracts for goods and construction. They also appear in the form of a deposit in contracts for land. As a general term for this kind of clauses the term ”compensation clause” is used.

The primary method used has been analysis of ordinary Swedish High Court-cases. As most of these cases date back to the turn of this century, the author discusses whether they still represent a correct view in today’s society. As much of the analysis conserns such intricate matters as construction of contracts, cases from other Nordic countries are not used. However, Nordic legal literature is considered frequently in the discussion. English and German law on the field is dealt with in a separate chapter.

The main result of the study is that the individual purpose of the compensation clause appears to play only a minor role in its application. However, a general aim, to provide compensation and fascilitate dispute settlement, is fulfilled through presumptions and adjustment. The main aspect is whether the clause requires a breach of contract. Different kinds of clauses are applied similarly. Thus the term ”compensation clause” is recommended as a more general term for clauses requiring breach of contract and specifying either a special amount or the basis for calculation.

The construction of the clause in different aspects is discussed, e.g., the relevant breach, the necessity and influence of the actual damage and the possibility of requiring performance of the contract. The possibility of an adjustment of the amount according to Contract Act 36 § is considered, as well as the validity of a clause connected with an invalid obligation.