Penalty, n.; pl. Penalties.
Etymology: [F. pénalité. See Penal.]
1. Penal retribution; punishment for crime or offense; the suffering in person or property which is annexed by law or judicial decision to the commission of a crime, offense, or trespass. Death is the penalty imposed. Milton.
2. The suffering, or the sum to be forfeited, to which a person subjects himself by covenant or agreement, in case of nonfulfillment of stipulations; forfeiture; fine. The penalty and forfeit of my bond. Shak.
3. A handicap. [Sporting Cant]
Note: The term penalty is in law mostly applied to a pecuniary punishment. Bill of pains and penalties. See under Bill. -- On, or Under, penalty of, on pain of; with exposure to the penalty of, in case of transgression.
Shades of meaning
Fernald lists penalty only as an antonym, under gift, mercy, pardon, propitiation.
He lists it without comment; the entries above explain its neighbors.