The institute of contractual penalty is one of the oldest legal institutes known since Roman law. In Roman law, the contractual penalty was concluded in the form of a stipulation, which is where the name stipulatio poenae originates from. A contractual or conventional penalty (stipulatio poenae) is a sum of money or some other financial benefit that the debtor undertakes to pay or transfer to the creditor if he does not fulfill an obligation at all or not on time. A Contractual penalty is a conditional obligation, which means that the payment of the contractual penalty depended on some future and uncertain circumstance. Roman law recognized two types of conventional penalty clauses: non-genuine conventional penalty clauses and genuine conventional penalty clauses. In the case of a genuine penalty clause, the parties included both the main obligation and the conventional penalty in the stipulation. In contrast, in the case of a non-genuine penalty, only a sum of money was stipulated and therefore the debtor was only required to pay the stipulated sum of money. In Roman law, contractual penalties had two known purposes. On the one hand, the purpose of the contractual penalty was to relieve the creditor of the necessity of proving his claim for damages and the exact amount of the damage he suffered. On the other hand, the contractual penalty had the purpose of intimidating and exerting pressure on the parties to fulfill their obligations. The aim of this paper is to present the institute of contractual penalty in Roman law and compare it with the institute of contractual penalty in contemporary Croatian law. The paper begins with an explanation of the term stipulation and a description of its characteristics, which have been significantly changed over time. Following that, the institution of contractual penalty in Roman law will be presented. The types, functions, and range of application of conventional penalties will be explained after defining contractual penalties. In the final part of the paper, the institute of contractual penalty in the contemporary Croatian law will be presented. Finally, in the conclusion, the similarities and differences between the institution of contractual penalty in Roman and contemporary Croatian law will be highlighted.