Legal Problems On Application Of Penalties

Fine for breach of contract, as one of essential system of the civil law, owns both certain value in theories and obvious significances in practice. There are always many controversies over the nature of fine for breach of contract and in China, the system of fine for contractual breach has undergone different stages from statutory fine to agreed fine. The Contract Law sets a relation between fine for breach of contract and the loss resulting from the breach and empowers judger or arbitrator to adjust the sums of the fine for breach of contract. However, how to identify the term"unreasonably much higher than"stated in the Contract Law and how to adjust the fine remains a controversial issue either in theoretical or judicial circles. In the paper the author makes analysis of the following issues related with fine for breach of contracts: the nature of the fine stated in Article 114 of the Contract Law in China shall be mainly compensatory with punishment as a supplement; the decision of application relations between fines and compensation for losses shall be based on the nature of the fines; fines shall be connected with agreed breach situations; adjustment of fine for breach of contract shall be initiated by application of involved parties; meanwhile, influences of such factors as subjective mistakes of involved parties need to be considered. Finally, the author puts forward a number of constructive proposals for consummating the contractual breach fining system by means of issuing Judicial Explanations.