This paper presents a formal system for reasoning about violations of obligations in contracts. The system is based on the formalism for the representation of contrary-to-duty obligations. These are the obligations that take place when other obligations are violated as typically applied to penalties in contracts. The paper shows how this formalism can be mapped onto the key policy concepts of a contract speci- fication language. This language, called Business Contract Language (BCL) was previously developed to express contract conditions of relevance for run time contract monitoring. The aim of this mapping is to establish a formal underpinning for this key subset of BCL.