The Nature Of Liquidated Damages

As one of major systems involved in the field of China’s civil contract, the liquidated damage system has been applied widely, as well as civil and commercial contract system, when domestic economy is rapidly growing, coupled with perfecting market system. In sharp contrast, there persist controversies over liquidated damage system, which highlights the nature of liquidated damages. Thus, a variety of disputes and problems arise as those contracts come into effect. Among them, a significant proportion concentrates on non-clarity in the nature of liquidated damages, primary-secondary relationship amid two different liquidated damages and punitive liquidated damages bearing upon its presence, position and application. However, legislated system of liquidated damage falls short of its effects, failing to root out those foregoing issues, notwithstanding Interpretation of Contract Law is included. Based on the facts, therefore, this thesis embarks on a new research in China’s liquidated damage system, from the standpoint of the nature of liquidated damages, with a view to offering valuable and constructive insights for future theory remedying the system, which may be of more benefit to healthy market economy as expected.Chapter one begins with what liquidated damages and a couple of distinct liquidated damages are respectively, then giving a glance at the history of liquidated damage nature. Subsequently, in order to shed light on its status quo, this part probes into various viewpoints over liquidated damage nature in the present day. Finally, this paper humbly presents its definition over the nature of liquidated damages, namely, revised teleological interpretation. It means that, the nature of liquidated damages is a combination of compensatory and punitive element, without regard to which one is prior; good compliance should be taken with what is contracted by parties, before the nature of its liquidated damages is specified in one contract. In other words, how to define liquidated damages should be based on a thorough analysis of its clauses and objectives, rather than relying on legislature, judiciary and arbitration.Chapter two focuses on revised teleological interpretation, whose arguments are pursued by comparative analysis of its two sides. Initially, this part disproves prevailing viewpoints denying punitive liquidated damages, while disclosing drawbacks and limitations within compensatory liquidated damages. Furthermore, it expounds on why liquidated damages can be punitive itself, and why punitive liquidated damages are required to function liquidated damage system. In this way, the thesis offers valid reasons for necessity and implication of punitive liquidated damages on the bright side.In Chapter three, as a consequence of flawed liquidated damage system in China, it mainly put forward some positive solutions to related problems. At first, research is conduct into liquidated damage system which belongs to two clear-cut law systems, then, this part dwells upon issues confronting China’s liquidated damage system, for instance, legislative conflicts due to unwise assimilation of legislating approaches in distinct law systems, rigid uniformity in adjustment concerning two different liquidated damages, and unjust disregard of individual autonomy. Finally, relevant solutions go as follows, that is, two different liquidated damages should be made clear by legislation to favor parties’ contract, and range of sum in two liquidated damages should be differentiated, as well as liability doctrines.This thesis holds views different from many talents’ to some extent, but the writer, as a modest figure, has no willingness to stand out, not to speak of spurring legislation for his humble opinions. Such efforts may offer valuable insights for the research of liquidated damages, contributing to perfect China’s liquidated damage system.