Penalties Law and Legal Definition

A penalty may be civil or criminal. Upon conviction of a crime, a person may be ordered to pay monetary fines or restitution, or forfeit property. A penalty may also be a period of incarceration. Criminal penalties are often based upon classification of crimes, such a misdemeanors and felonies.

Civil law violation penalties are most often monetary fines, such as fines for operating an unlicensed business. Other penalties may include closing down of operations or prohibiting operating privileges for a certain period. Contracts may also provide for penalties, such as an amount agreed in advance if payment or performance is not made on time, a "late payment" on a promissory note or lease, or percentage of the contract amount for each day a building contractor fails to complete a job.