Where a borrower to a loan agreement defaults mid-way through the loan, can the lender compel theborrower to pay the entire interest which the lender would have earned had the loan continued to theend of its term, or is this an unenforceable penalty clause?
The Singapore Court of Appeal (“CA”) considered this issue in the recent case of Ethoz Capital Pte Ltdv Im8ex Pte Ltd and others.
The CA commented that instances of ‘clever drafting’ would be ‘subject to rigorous analysis and [theCA] will not hesitate to strike it down’ should the clause be found to be an unenforceable penalty.
