Etymology
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penalty (n.)

c. 1500, "punishment," from Old French penalite and directly from Medieval Latin penalitatem (nominative penalitas), from Latin poenalis "pertaining to punishment" (see penal). Specifically as "the punishment laid out by law or judicial decision for a violation of the law" is by 1510s (also later for non-fulfillment or violation of an obligation or agreement). The sporting sense of "disadvantage imposed on a competitor for a breach of the rules" is by 1885; the ice hockey penalty box is attested by 1931.

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Definitions of penalty

penalty (n.)
the act of punishing;
Synonyms: punishment / penalization / penalisation
penalty (n.)
a payment required for not fulfilling a contract;
penalty (n.)
the disadvantage or painful consequences of an action or condition;
neglected his health and paid the penalty
penalty (n.)
(games) a handicap or disadvantage that is imposed on a competitor (or a team) for an infraction of the rules of the game;
From wordnet.princeton.edu