Penalty Clauses between Presumed and Proven Damage: An analytical reading of the case law of the Jordanian Court of Cassation and its shifts (2000–2026)

Executive summary

A penalty clause (liquidated damages clause) appears in most of the contracts the firm drafts or litigates: construction, supply, lease and commercial agency contracts, employment contracts and non-compete undertakings, and financial settlements. Almost every dispute raises the same question: is it enough for the creditor to prove the breach in order to be awarded the agreed sum, or must the creditor also prove that it suffered damage?

The Court of Cassation has not settled on a single answer. Its General Assembly reversed its position on this issue at least twice in five years, and ordinary panels have since continued to rule both ways. The most recent decisions we identified are two judgments issued in 2026 with opposite outcomes (3680/2026 of 9/7/2026 and 4957/2026 of 7/10/2026).

Introduction

1. Why the issue matters

A penalty clause is both a security device and a tool for predictability: the parties fix in advance what one will be owed if the other breaches, sparing themselves a long dispute over whether damage exists and how much, and giving the debtor an incentive to perform. The clause loses much of its value if, after the breach, the creditor must prove the damage by ordinary means and then have it assessed by experts; it becomes no more than a ceiling on compensation. Conversely, presuming damage without limit may turn the clause into a private penalty imposed by the stronger party.

In practice the answer often decides the case: who bears the burden of proof, whether an expert assessment is needed, when a reduction must be requested, and what the statement of claim and the statement of defence must contain.

2. The research question

The central question is whether, under Jordanian law, damage is presumed once a breach of an obligation secured by a penalty clause is proven, so that the debtor bears the burden of disproving it, or whether damage is an element the creditor must prove, as with judicial compensation. Sub-questions follow: why has the disagreement persisted after two General Assembly decisions, and how do the type of contract (employment or civil) and the type of clause (delay or non-performance) affect the answer?

3. Method and sources

The study uses an analytical and inductive method: it surveys the Court of Cassation's civil judgments on the issue from 2000 to 7/10/2026, traces their chronology and the composition of the panels that issued them, and analyses their reasoning in light of the Civil Code, the Labour Law and the Law on the Formation of Regular Courts. Three sources were used: the firm's legal library (Court of Cassation judgments and the principles published by the Technical Office of the Judicial Council), the Qarark database of judgments and consolidated legislation, and the texts published by the Legislation and Opinion Bureau. Where we have seen only a reference to a judgment in later decisions rather than its full text, we say so.

4. Structure

• Part One: the legislative framework of penalty clauses in Jordanian law.
• Part Two: the course of Court of Cassation case law (2000–2026).
• Part Three: analysis and assessment of the disagreement, and the author's view.
• Part Four: practical consequences in litigation and in contract drafting.
• Conclusion: findings and recommendations, followed by a table of judgments and a list of references.

Part One: The legislative framework

Section 1: The governing provisions

Civil Code No. 43 of 1976 regulates penalty clauses under the heading of performance by way of compensation, in two adjacent provisions:

Article 363: "If compensation is not fixed by law or by the contract, the court shall assess it as equal to the damage actually incurred at the time it occurred."

Article 364: "1. The contracting parties may fix in advance the amount of compensation by stipulating it in the contract or in a subsequent agreement, subject to the provisions of the law. 2. The court may in all cases, at the request of either party, amend that agreement so as to make the assessment equal to the damage, and any agreement to the contrary shall be void."

Linked to these is the requirement of formal notice: Article 361 provides that "compensation is not due until the debtor has been put on notice, unless the law or the contract provides otherwise", and Article 362 lists cases in which notice is unnecessary, including where performance has become impossible or futile through the debtor's act, or where the debtor has declared in writing that he will not perform.

For fixed-term employment contracts there is a special provision, Article 26(b) of Labour Law No. 8 of 1996, whose wording we confirmed is unchanged in the consolidated text of the Labour Law and its amendments:

"If termination of a fixed-term contract is made by the employee in cases other than those provided for in Article 29 of this Law, the employer may claim from the employee the loss and damage arising from such termination, the assessment of which rests with the competent court, provided that the amount awarded against the employee does not exceed half a month's wage for each month remaining in the contract."

Other relevant provisions include Article 2 of the Civil Code, which refers the court, in the absence of a text, to the rules of Islamic jurisprudence most consistent with the Code, and Article 251, which applies the rules on contracts to unilateral acts "except those relating to the need for two matching wills to form a contract".

Section 2: What the Jordanian text leaves unsaid

The Jordanian text does not expressly say that damage is presumed, nor that the creditor must prove it. The significance of this silence becomes clear when compared with the Egyptian Civil Code, the model for many Arab codes. Its Article 224 provides: "1. Agreed compensation is not due if the debtor proves that the creditor suffered no damage. 2. The judge may reduce this compensation if the debtor proves that the assessment was grossly excessive or that the principal obligation was partly performed." Article 225 bars the creditor from claiming more than the agreed sum unless he proves fraud or gross fault on the debtor's part.

The Egyptian legislature settled the matter: damage is presumed and the debtor must prove its absence or excess. The Jordanian legislature chose different wording, influenced by Islamic jurisprudence, which does not allow compensation except for actual damage: it gave the court power to amend "in all cases", upwards or downwards, "at the request of either party", so that "the assessment is equal to the damage", and made this a matter of public order. Hence the split in case law:

• One view holds that Article 364(2) ties compensation to actual damage and follows Article 363, which measures compensation "as equal to the damage actually incurred"; damage therefore remains an element to be proven by whoever claims it under the general rules.
• The other view holds that Article 364(2) makes amendment conditional on "the request of either party", so the judge does not intervene of his own motion, and whoever requests amendment or disputes the existence of damage bears the burden of proving that request; and that agreeing in advance on the amount of compensation expresses the parties' will to presume that damage occurs and its extent.

Article 390 of the UAE Civil Transactions Law of 1985 was almost identical to Jordanian Article 364. A new UAE civil transactions law issued in 2025 has, according to published commentary, reorganised the matter in Article 340 by setting out the grounds for reduction and increase in more detail. We mention this for comparison only; we have not reviewed the official text of the new UAE law.

Part Two: The course of Court of Cassation case law (2000–2026)

We set out below the stages the case law passed through, noting the composition of the panel that issued each judgment, since that is the key to the weight of each line. Under Article 9(a)(1) of the Law on the Formation of Regular Courts No. 17 of 2001, as amended, the Court of Cassation sits in ordinary panels of at least five judges, and sits as "a General Assembly of a president and eight judges" in cases including "where the Court of Appeal insists on its overturned decision" or where "one of its panels considers departing from a principle established in a previous judgment".

Stage one: presumed damage as the rule (until 2018)

Older case law held that a penalty clause makes damage presumed. Later judgments refer to General Assembly decision 3326/2000 to that effect (we have not seen its full text; it is cited in 2576/2015). Judgments from this stage include:

• Cassation 1500/2009 (5/8/2009): a penalty clause "makes the occurrence of damage presumed", but Article 364(2) means that if the defendant disputes entitlement or alleges excess, the claimant is entitled to an amount equal to the actual damage, not the full sum. This is a middle position to which the Court would later return.
• Cassation 2576/2015, General Assembly (23/6/2016), in an employment contract where the employee failed to report for work: "it is settled in the case law of this Court that a penalty clause ... makes damage presumed without the need to prove it".
• To the same effect, all in employment contracts: 3750/2016 (24/4/2017), 1583/2018 (7/5/2018), 2544/2018 (23/5/2018), 2895/2018 (19/7/2018), which referred to 4448/2014, and 8476/2018 (5/3/2019). By contrast, a five-judge panel held in 4308/2017 (7/6/2018) that damage is not presumed in an employment contract.

Note that 2895/2018 and 8476/2018 were issued after General Assembly decision 4310/2017 discussed below, yet applied presumed damage in employment contracts. Conflict between panels is not new.

Stage two: the reversal for employment contracts (2018–2019)

In decision 4310/2017, issued by the General Assembly presided over by the President of the Court of Cassation (5/6/2018), in a claim by a private university against a faculty member who never took up his post, the Court departed "from any previous case law" and held that a penalty clause in a fixed-term employment contract is agreed compensation consistent with Article 26(b) of the Labour Law, and that:

"the legislature ... allowed the employer to claim from the employee ... the loss and damage that may arise from such termination, the assessment of which rests with the competent court; it follows that damage is not presumed, since evidence of it must be adduced, otherwise how could the court assess it", subject to the ceiling in Article 26(b).

The General Assembly confirmed this in 39/2019 (25/8/2019) in the same case after remand, upholding the appeal judgment that had followed the reversal and dismissed the claim for lack of proof of damage. Decision 4105/2022 (26/9/2022) suggests there is another General Assembly decision, 32/2017, to the same effect (we have not seen it).

The reasoning in these decisions rests on the phrase "the assessment of which rests with the competent court" in Article 26(b) of the Labour Law, that is, on a provision specific to employment contracts, not on a general interpretation of Article 364 of the Civil Code.

Stage three: extending "not presumed" to civil contracts (2020–2022)

Some ordinary panels then carried the "damage is not presumed" rule over from employment contracts to civil and commercial contracts, relying on 4310/2017 and 39/2019 without distinguishing between the two fields:

• Cassation 5966/2019 (5/8/2020): in a settlement agreement between two partners under which one undertook to release a mortgage over the other's property, with a clause requiring 300 dinars for each month of delay, the Court overturned the award of the clause amount because "damage is not presumed, since evidence of it must be adduced".
• Cassation 3280/2021 (29/7/2021), then 6857/2021 (15/2/2022), then 5694/2022: three successive reversals in a single case concerning a tyre supply contract, all holding that the creditor must prove the elements of contractual liability including damage, because "damage is not presumed".

Stage four: the counter-reversal – decision 114/2021, General Assembly

When the mortgage-release case (5966/2019) returned to the Court of Appeal, it insisted on its original judgment ordering the debtor to pay 54,000 dinars for fifteen years of delay. The appeal against that insistence was heard by the General Assembly, which on 14/12/2021, by majority, issued decision 114/2021, departing from reversal decision 5966/2019 and upholding the judgment. Its main holdings were:

1. A penalty clause "is no more than an agreed assessment of the compensation the debtor bears if he breaches his obligations", and may appear in the original contract or in a later agreement.
2. "Liability for compensation under the contract arises upon the mere breach of the obligation", and the parties' agreement on the extent of the damage "is no more than an expression of their will to presume its occurrence and extent, and it is a legal presumption that may be rebutted".
3. Within agreed compensation, damage "is presumed and the creditor does not bear the burden of proving it; the debtor may prove that the creditor suffered no damage, and the burden of proving this lies on him (the debtor)" under Article 364(2).
4. A debtor's request for an expert assessment to set or reduce compensation is contrary to law if the debtor did not claim before the trial courts that the creditor suffered no damage from the non-performance; the matter cannot be raised for the first time before the Court of Cassation.
5. Compensation runs from the date of the breach or refusal to perform, not from the date of the formal notice.
6. It confirmed General Assembly decision 2320/2018 (10/5/2018) allowing specific performance to be combined with a penalty clause where the clause is stipulated merely for delay, as an exception to the rule against combining them.

One judge dissented: Dr. Fouad Al-Daradkeh, author of the treatise "The Penalty Clause (Agreed Compensation) in the Jordanian Civil Code – A Comparative Study", which the Court itself cited in 5966/2019 and 114/2021. The dissent argued:

• that fixing the amount of compensation does not mean the parties relieved the court of verifying that damage occurred, since "whether compensation exists or not is not within the function of the penalty clause";
• that a penalty clause is ancillary to a principal obligation "and must therefore take on its characteristics", and an award of compensation presupposes the general conditions of civil liability, including damage, under Articles 256, 261 and 363;
• that the contrary view turns the clause into a penalty triggered by mere non-performance "regardless of whether a result – damage – occurs or not";
• that the Jordanian legislature was influenced by Islamic jurisprudence, which allows compensation only for damage that has occurred or is certain to occur, and that presuming damage is "a doctrinal construction with no basis in the text of the law";
• that Article 364(2) is consistent with the limitation in Article 363 and contains nothing indicating that damage is presumed; "rather, it is understood that damage must occur before the penalty clause can be claimed".

Decision 114/2021 expressly departed only from reversal decision 5966/2019; it did not mention departing from 4310/2017 or 39/2019, although the overturned judgment had relied on them. We return to the consequences in Part Three.

Stage five: decision 5875/2023, General Assembly – confirmation with a new distinction

The tyre supply case (3280/2021, 6857/2021 and 5694/2022) came back to the Court of Cassation for the fourth time, and the Court referred it to the General Assembly "for the purpose of departing from the previous reversal decisions". The General Assembly, presided over by the President of the Court, issued decision 5875/2023 on 22/4/2024 and reached two conclusions:

1. That the question of presumed damage "is not the decisive issue in this case", because the clause covered late performance (30 dinars per day of delay), while the claimant sought termination and a refund for goods never delivered. Under the Court's settled case law (including 388/2020, General Assembly), a delay penalty is awarded only where the debtor performed after the deadline; in non-performance or incomplete performance, compensation is assessed under Article 363 as equal to the actual damage once proven. The claim for the delay penalty (1,710 dinars) was therefore dismissed.
2. That it was "necessary to depart from the previous reversal decisions ... nos. 3280/2021, 6857/2021 and 5694/2022 insofar as they held that damage is not presumed where the agreement contains a penalty clause and that the creditor bears the burden of proving it, contrary to the settled case law of the Court of Cassation (114/2021, General Assembly)".

The decision thus clearly confirmed that the settled position is presumed damage, and added an important limit on the scope of delay clauses. At the same time, it described the presumption question as not decisive in the case, which some may invoke to argue that what it said on that point was obiter. We address this in Part Three.

Stage six: a continuing split (2023–2026)

Despite these two decisions, judgments by ordinary panels since then have divided as follows:

A. Judgments applying presumed damage

• Cassation 1654/2023 (27/7/2023): reproduced the reasoning of 114/2021 verbatim and held that the creditor is entitled to the clause amount "unless the debtor proves ... that the creditor suffered no damage".
• Cassation 2932/2024 (11/7/2024, five-judge panel): upheld an award of a 50,000-dinar penalty clause because the defendants had not proven absence of damage, describing this as "the position of recent case law on this question", relying on 114/2021, General Assembly.
• Cassation 4957/2026 (7/10/2026): held that "liability for compensation under the contract arises upon the mere breach ... and the creditor does not bear the burden of proving damage in agreed compensation", but overturned the judgment because the debtor had disputed the existence of damage in his statement of defence, so the Court of Appeal should have ordered an expert assessment in order to exercise its power of amendment under Article 364(2).

B. Judgments requiring proof of damage

• In employment contracts and related obligations: Cassation 4105/2022 (26/9/2022), an employer's penalty claim for leaving work; 3488/2023 (29/8/2023, three-judge panel), a non-compete clause in an employment contract worth twelve months' wages; 6076/2024 (28/11/2024), an undertaking signed by an employee not to publish the employer's projects for two years after leaving; and 4853/2025 (13/10/2025), an employee leaving a fixed-term contract.
• In civil contracts: Cassation 3516/2024 (31/12/2024, five-judge panel), delay penalties in a construction contract, held that "damage is not presumed; evidence of it must be adduced", repeating verbatim the reasoning of the reversal decisions the General Assembly departed from in 5875/2023; and 3680/2026 (9/7/2026), a contract to perform at a concert, dismissed a 60,000-dinar penalty claim, stating that "the case law has settled" on requiring proof of fault, damage and causation, relying on 3516/2024.

In 3680/2026 the Court itself, in another part of the case, accepted the claimant's entitlement to 30,000 dinars as "the value of loss and damage agreed between the parties in the event of termination" without requiring proof of damage, and found that the second penalty clause never arose because the contract was deemed terminated by operation of law before the concert date. The general statement that proof of damage is "settled" was therefore not the sole basis of the judgment.

C. A related issue: unilateral undertakings

In 3439/2023 (3/6/2024, three-judge panel), a company claimed fifty thousand dinars from a former employee under an "undertaking of employment obligations" that he alone had signed. The Court held that a penalty clause "exists only by agreement, in contracts and through two wills", and that "a penalty clause cannot be conceived of in a personal undertaking", relying on Article 251 of the Civil Code, and dismissed the claim. This is an important practical limit on the drafting of employee undertakings and non-compete undertakings.

Summary table of the main milestones

Part Three: Analysis and assessment

Section 1: Why did two General Assembly decisions not settle the issue?

At first sight, two General Assembly decisions should have unified the case law. A reading of the later judgments reveals three reasons why the split continues:

First reason: two parallel General Assembly lines

Decision 114/2021 departed from a reversal issued by an ordinary panel (5966/2019) but did not announce a departure from General Assembly decisions 4310/2017 and 39/2019 on which that reversal relied. Decision 5875/2023 did the same with three ordinary reversals. Ordinary panels were thus left with two lines, both from the General Assembly: a "not presumed" line (4310/2017 and 39/2019) and a "presumed" line (114/2021 and 5875/2023). This explains why the judgments requiring proof of damage after 2021 mostly refer, directly or indirectly, to the reasoning of 4310/2017.

Second reason: the specificity of employment contracts

If the judgments are arranged by type of contract rather than by date, a clear pattern emerges: most recent judgments requiring proof of damage concern employment contracts or obligations linked to employment (4105/2022, 3488/2023, 6076/2024, 4853/2025), while judgments on civil and commercial contracts applied the presumption (1654/2023, 2932/2024, 4957/2026). This distinction has a genuine statutory basis: Article 26(b) of the Labour Law is a special provision that leaves the assessment of loss and damage "to the competent court" and sets a ceiling that may not be exceeded, and damage that has not been proven cannot sensibly be assessed. It also protects the employee, as the weaker party, from high penalty clauses dictated by the employer, consistent with Article 4(b) of the Labour Law, which renders void any condition by which an employee waives a right granted by the Law.

This reconciliation does not account for every judgment, however: 3516/2024 (construction contract) and 3680/2026 (performance contract) concern purely civil contracts, yet required proof of damage in general terms taken from the reversal decisions the General Assembly had departed from.

Third reason: the "incidental" character of the confirmation in 5875/2023

In 5875/2023 the General Assembly described the presumption question as "not the decisive issue in this case" and then based its ruling on the delay clause not applying to non-performance. Those who hold the opposing view may argue that what it said about the presumption was obiter and therefore not a departure in the strict sense. We do not share that view: the operative part of the decision expressly ordered "departure from the previous reversal decisions ... insofar as they held that damage is not presumed", so the departure from the principle appears in the operative part, not merely in the reasoning. But the wording left room for argument.

Section 2: The procedural problem with the contrary judgments

Article 9(a)(1) of the Law on the Formation of Regular Courts requires the General Assembly to sit where "one of its panels considers departing from a principle established in a previous judgment". The question was in fact put to the General Assembly in 114/2021 and 5875/2023. If an ordinary panel later holds that damage is not presumed in a civil contract, without referring the case to the General Assembly and without explaining how the facts differ from the established principle, it departs from a General Assembly principle outside the route the law prescribes for doing so. Jordanian law does not, strictly speaking, recognise binding precedent, and such a judgment remains effective between its parties; but the departure weakens the authority of those judgments and provides a basis for asking that similar appeals be referred to the General Assembly.

Section 3: Assessing the arguments on each side

A. Arguments for "not presumed"

• Damage is an element of contractual liability as of tort liability, and a penalty clause is ancillary to the principal obligation and creates no independent liability.
• The Jordanian legislature did not adopt Article 224 of the Egyptian Code; it tied agreed compensation to actual damage and made this a matter of public order.
• Islamic jurisprudence, an interpretive source under Article 2, allows compensation only for damage that has occurred.
• Presuming damage may turn the clause into a penalty and may be exploited by the stronger party.

B. Arguments for "presumed"

• Article 363 itself confines judicial assessment to the case where "compensation is not fixed ... by the contract"; where it is fixed, a different regime applies, that of Article 364.
• Amendment under Article 364(2) takes place "at the request of either party", so the judge does not do it of his own motion, and as a rule whoever requests something must prove it.
• Agreeing on the amount in advance expresses a shared will to presume the damage; overriding that will empties the clause of content and reduces it to a ceiling on compensation.
• The presumption is simple, not conclusive: the debtor can rebut it by proving the creditor suffered no damage, or reduce the amount by proving excess, so the clause does not become a penalty.
• Stability of transactions and predictability of the outcome of disputes, which are the very purposes of penalty clauses.

Section 4: The author's view

In our view, the position adopted by the General Assembly in 114/2021 is the better one for civil and commercial contracts, for the following reasons:

1. The sequence of Articles 363 and 364 indicates two regimes: judicial assessment where there is no agreement, and agreed assessment that the court may amend at the request of either party. If the creditor had to prove damage in both cases, Article 364(1) would have little practical effect.
2. The link Article 364(2) draws between compensation and damage is in fact preserved under a presumption, since the debtor may still disprove damage altogether or show it is less than agreed; there is no conflict between the presumption and the principle that compensation is only for damage. The disagreement is in truth about the burden of proof, not about whether damage is necessary.
3. Shifting the burden to the debtor is the solution most consistent with the parties' intention and with the position of a debtor who has breached his obligation.

Conversely, we consider that fixed-term employment contracts are subject to a special rule imposed by Article 26(b) of the Labour Law: damage is not presumed, the employer must prove it, and the amount awarded may not exceed half a month's wage for each remaining month. This distinction allows the General Assembly decisions to be reconciled rather than treated as contradictory: 4310/2017 and 39/2019 within the Labour Law, and 114/2021 and 5875/2023 within the Civil Code. Obligations arising after the end of employment, such as non-compete or confidentiality obligations, are a finer question, and recent judgments (3488/2023, 6076/2024) tend to treat them as part of the employment relationship.

Finally, the current situation calls for a clear resolution: either a General Assembly decision defining the scope of each line and expressly departing from whatever conflicts with it, or a legislative amendment to Article 364 codifying a simple presumption and the grounds for reduction, as Article 224 of the Egyptian Code does.

Part Four: Practical consequences

Section 1: In litigation – for the creditor (claimant)

• Rely expressly on 114/2021 and 5875/2023 (General Assembly) and on the later consistent judgments (1654/2023, 2932/2024, 4957/2026), and show that the contrary judgments were issued by ordinary panels or concern employment contracts.
• Do not rely on the presumption alone: plead the facts of the damage in the statement of claim and file whatever evidence of it is available as a fallback, because some panels still require proof, and if the debtor disputes the damage the court may order an expert assessment (4957/2026).
• Check formal notice: serve a notarial notice before suing unless the contract expressly waives it or one of the cases in Article 362 applies.
• Identify the type of breach precisely: if the clause is a delay clause and the debtor never performed, do not claim the delay penalty alone; claim judicial compensation under Article 363 with proof of damage, or claim specific performance together with the delay penalty (2320/2018, General Assembly).
• Calculate compensation from the date of the breach, not from the date of notice (114/2021).
• In employment contracts: actually prove the damage (financial data, replacement cost, loss of clients) and respect the ceiling in Article 26(b).

Section 2: In litigation – for the debtor (defendant)

• Dispute the existence and amount of the damage expressly in the statement of defence before the court of first instance, and request an expert assessment to amend the amount under Article 364(2); this defence is not accepted for the first time before the Court of Cassation (114/2021).
• Produce evidence that there was no damage, or that it is well below the agreed amount.
• If the clause is a delay clause and the claim is based on non-performance or partial performance, argue that it does not apply (5875/2023, General Assembly).
• If the relationship is an employment relationship, rely on Article 26(b), General Assembly decisions 4310/2017 and 39/2019, and the compensation ceiling.
• If the clause appears in an undertaking signed by your client alone, argue that it is not a penalty clause (3439/2023).
• Check formal notice and the date of breach: the clause is not due before notice unless the contract waives it.

Section 3: In contract drafting

1. Separate two clauses: a penalty for delay (an amount per day or week) and a separate clause for non-performance or termination for breach (a lump sum). A delay clause alone does not cover non-performance.
2. Tie the amount to a reasonable estimate of the expected damage, and state in the contract the elements of that estimate (cost of a substitute, lost profit, obligations to third parties). This strengthens the presumption and weakens a request for reduction.
3. State that the parties agree the amount is a pre-estimate of damage presumed to occur and is payable without proof of damage. This does not prevent the court from amending it, since Article 364(2) is a matter of public order, but it reinforces the presumption.
4. Provide for waiver of formal notice if desired; Article 361 allows the parties to agree otherwise.
5. In employment contracts: do not exceed the ceiling in Article 26(b) in the clause on leaving before the end of the term, and place non-compete and confidentiality obligations in the employment contract itself or in an annex signed by both parties, not in a unilateral undertaking signed by the employee alone.
6. Specify the date from which the penalty runs and its end date or maximum.

Conclusion

1. Findings

1. The Jordanian legislature did not expressly provide that damage is presumed under a penalty clause, unlike Article 224 of the Egyptian Civil Code, and left Article 364 to judicial interpretation.
2. Court of Cassation case law has passed through six stages: presumed damage until 2018; reversal for employment contracts by General Assembly decisions (4310/2017 and 39/2019); extension of "not presumed" to civil contracts by ordinary panels; the counter-reversal in 114/2021 (General Assembly); its confirmation in 5875/2023 (General Assembly); and a continuing split up to October 2026.
3. The position established by the General Assembly for civil contracts is that damage is presumed as a simple presumption, that the burden of disproving it or proving excess lies on the debtor, and that the defence of absence of damage must be raised before the trial court.
4. The split persists because the General Assembly line on employment contracts has not been expressly departed from, and because some ordinary panels carried its reasoning over to civil contracts without referring the question to the General Assembly.
5. A delay penalty is not due for non-performance or partial performance (5875/2023, General Assembly), and a clause in a unilateral undertaking is not a penalty clause in the view of some panels (3439/2023).

2. Recommendations

1. To the Court of Cassation: refer the first suitable appeal to the General Assembly for a decision that expressly defines the scope of each line, departs from any contrary case law on civil contracts, and settles the treatment of post-employment obligations.
2. To the legislature: amend Article 364 to add an express provision that agreed compensation is not due if the debtor proves the creditor suffered no damage, and to specify the grounds for reduction (excess, partial performance, the creditor's own fault).
3. To lawyers: draft statements of claim and defence on the basis of both possibilities, and distinguish carefully between delay clauses and non-performance clauses, and between employment and civil relationships.
4. To companies and contracting parties: review existing contract templates in light of the above, particularly construction and supply contracts, employment contracts and employee undertakings.

References

1. Legislation

• Jordanian Civil Code No. 43 of 1976, Articles 2, 251, 256, 266 and 360–364.
• Labour Law No. 8 of 1996, as amended, Articles 4 and 26.
• Law on the Formation of Regular Courts No. 17 of 2001, as amended, Article 9.
• Civil Procedure Law No. 24 of 1988, as amended, Article 202.
• Egyptian Civil Code No. 131 of 1948, Articles 223–225 – for comparison.

2. Judgments of the Jordanian Court of Cassation (civil)

• General Assembly: 3326/2000 (cited), 2576/2015, 32/2017 (cited), 4310/2017, 2320/2018, 39/2019, 388/2020, 114/2021 (with dissent), 5875/2023.
• Ordinary panels: 1500/2009, 4448/2014 (cited), 3750/2016, 4308/2017, 1583/2018, 2544/2018, 2895/2018, 8476/2018, 5966/2019, 3280/2021, 6857/2021, 4105/2022, 5694/2022, 1654/2023, 3439/2023, 3488/2023, 2932/2024, 3516/2024, 6076/2024, 4853/2025, 3680/2026, 4957/2026.
• Source of judgments: the Qarark database and the legal library of Hjouj Law Firm & Arbitration (Court of Cassation judgments and principles of the Technical Office of the Judicial Council).

3. Doctrine

• Dr. Fouad Al-Daradkeh, The Penalty Clause (Agreed Compensation) in the Jordanian Civil Code – A Comparative Study (cited in Cassation 5966/2019 and 114/2021).
• Dr. Abdel Aziz Al-Morsi, The Theory of Partial Invalidity of Legal Acts in the Egyptian Civil Code – An Analytical and Comparative Study, 2006 (cited in Cassation 114/2021).

This study is general legal research prepared for information and awareness purposes and is not legal advice on any particular case. The outcome of each dispute depends on its facts, documents and the composition of the panel hearing it. The judgments cited are current to 7/10/2026.

This content is general information and does not replace advice on the facts of your case and the legislation that applies to it.

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