Alder v Moore
Court of Appeal
Citations:  2 WLR 426;  2 QB 57;  1 All ER 1;  2 Lloyd’s Rep 325; (1961) 105 SJ 280;  CLY 1013.
The Association Football Players’ and Trainers’ Union provided registered players with an insurance policy. One of the provisions of the policy stated that it would pay out £500 if the player suffered injuries permanently disabling them from playing professional football.
The defendant was a registered player who sustained a serious eye injury. When he claimed the £500 for the injury, the insurance underwriters told him that he had to make a declaration that he would no longer take part in any form of professional football. If he infringed the declaration, he would be liable to pay a penalty of £500. The defendant agreed.
The defendant began playing football again after four months. The underwriters sued for the return of the £500. The defendant countered that the declaration was an unenforceable penalty clause.
- Was the declaration a penalty clause?
The Court of Appeal held in favour of the underwriters. Even though the declaration used the word ‘penalty’, it was not a penalty clause. The clause did not ban the defendant from playing football: rather, the declaration that the defendant could no longer play football was proof that he was eligible for the £500. Properly construed, the clause only required the defendant to reimburse money which had been paid out on a false basis. The underwriters could therefore enforce the declaration and recover the money.
This Case is Authority For…
The rule against penalty clauses only applies to clauses which state that the defendant is liable to pay a particular sum if they breach the contract. It does not apply to clauses which require the defendant to pay money in response to some other event.