Thinking Of The Value And Applicability Of Liquidated Damages Exists

At all times and in all over the world, penalty clauses is used widely in the contract practice. There are special provisions about penalty clauses in the Article 114 of the contract law of the PRC. But it is so simple and ambiguity that there are different understandings in academia. There is no definition about penalty clauses in the contract law. Judicial interpretations have issued to solve the problems in the application of law on penalty clauses, but it is still confusedly in such application. It is generally acknowledged that penalty clauses can be divided into punitiveness and compensationness.The argument about penalty clauses originated in the attitude towards its punitiveness. According to traditional theory in civil law, penalty clauses has been endowed with both punitiveness and compensationness, and compensationness is the major function. Some scholars even suggested that it is compensationness only. According to its necessity, the contract law of the PRC approves its punitiveness, and the parties may agree on it in the contract. In practice, that mostly debated is how to reduce the penalty clauses which is much higher than the damage indeed. The standard which is much higher than the damage indeed hasn't a conclusion, neither do the extent which should reduce to. Thus, both judges and lawyers often feel confused and disoriented in dealing with the case in practice. This paper investigates the concept,characteristic and existing value of penalty clauses. It also analyzes the function both punitiveness and compensationness. Base on the discussion above, the writer is of the opinion that punitiveness is embodied much the value of penalty clauses than the compensationness. The writer also put forward some advocates in this paper, such as the standard and condition for the application of penalty clauses,the relation between penalty clauses and other forms of responsibility and the amount of adjustment of penalty clauses. Finally, the writer analyzes the problem of regulations in the contract law of the PRC, and tries to offer some suggestions about how to perfect the penalty clauses system in China.