On The Application Of Liquidated Damages

After the formation of the contract, but before it get into effect, the preventionand the relief of the performance of the contract concern with the protection of theinterests of the two parties, the normal social order of contract and the realization ofand the trade security of the justice really closely. Every country takes action toprevent the infringement of the contract and offer some kind of relief, and liquidateddamages for breach of contract is one of the oldest kinds of ways for redemption.Concrete regulations are made regarding liquidated damages for breach of contract inarticle 114 of PRC Contract Law, but the legislation is too simple, so there is a broadarguments about this problem fiercely, seriously influencing the practical use of thisprovision. Simultaneity, since the provision is stated principally, we have noinstruction to follow when we deal with the case in practice;it also broadens equitablediscretion of the judges and increases the difficulties of the solving of the cases. In this article, by comparing the continental law legal system and common law,I will on the base of the historical research on the liquidated damages for breach ofcontract, distinguish the compensative and punitive liquidated damages;take a viewon article 114 of PRC Contract Law;we conclude that the nature of liquidateddamages in our Country is both compensative and punitive. here, I also discuss theuse ness of the two kinds of liquidated damages, including the adjustment of theamount of the two kinds of liquidated damages and the relationship betweenliquidated damages and other relieves of breach of contract (such as specificperformance, damages, earnest money). So we can deal with the problem well whenall relieves conflict with each other. As we know, our Contract Law has provisionsabout the liquidated damages for breach of contract, however, it is so simple, anddoesn't make concrete regulations, such provision, I think it go against the advantageof liquidated damages for breach of contract. So we should apply the measures ofrelief reasonably according the specific situation to balance the interest of the parties,and try our best to protect the interest of the creditor.Finally, combining with China's real legislative and practical situation, thisarticle tries to offer some procedure suggestions about how to perfect the penaltysystem in China, such as making the adjustment criterion on the liquidated damagesfor breach of contract when it is unreasonable;fixing the term limit when the partyclaim to adjust the amount of the liquidated damages;and the parties' burden., withthe hope to strengthen the practical operation of the liquidated damages of breach ofcontract provision in the individual cases.