Penal damages can be ultimately be understood as excessive contracted for damages in a contract. A good way to think of a penal damage is an excessive or aggressive liquidated damages clause. These damages are often seen as in terrorum and will not be enforced by the courts. These types of damages not only seek to redress, they seek to build in punitive damages into the contract to disincentivize breach. They do this by assigning penalties that are far more than the party that suffers the breach will suffer.