Thanks for your comments.  There  is obviously a range of possibilities. I
should clarify a couple of things about our jurisdiction -- and I think,
very generally, it brings it in line with what most people were talking
about in the States. I should not have used "penalty" as that brings up
the notion of "fine and penalty" and their not being enforceable. Despite
not teaching real estate law here I should have known better from my
contracts knowledge or lack thereof. Second, there are consumer statutes
that limit against usurous terms being imposed. I gather, in Ontario, the
amount cannot be more than six months interest (as in California?) but
there are undoubtedly variations as with the US.
 
So thanks for your comments. It is an interesting issue.  The frustration
for my colleague was not seeing the provision in the contract and this,
combined with her notion that any kind of "penalty" was unheard of in the
States (Illinois and Iowa where she was from) allowed her to think that if
it wasn't there it didn't exist. Of course, that is to ignore the notion
of breach of contract. This will make a good example to use in class.
 
Sally