Study On Punitive Liquidated Damages

The characteristic of the liquidated damages of our country is “compensation is the primary function, punishment is secondary one”, which indicates that China’s legislation does not prohibit the punishment function.There are both liquidated damages and punitive damages in China’s contact law. The former reflects the general function, and the latter reflects the auxiliary function. However, the relevant provisions of the liquidated damages are basically around the liquidated damages, it is lack of clear and systemic regulations about the punitive liquidated damages. Therefore, it leads to great differences in punitive liquidated damages judgment, application and adjustment in China’s judicial practice conclusion. In response to this phenomenon, this paper focuses on the content of the three parts:The first part: the judgment standard of punitive liquidated damages. According to academic theory, there are three standards: the parallel responsibility loss, the explained purpose and the loss comparison. Through comparison in the sight of the practices of legislative and judicial, I regard “the parallel responsibility loss” as the best standard.The second part: the necessity of the existence of punitive liquidated damages. I investigate the attitude of the main countries in the two legal systems to the punitive liquidated damage from the perspective of comparative Law. Countries of common-law mostly recognize the existence of punitive liquidated damages, and countries of civil-code are hostile to punitive liquidated damages. However, those counties are kind of accepting it in recent years. Due to the function of ensuring the fulfillment of the contract and preventing the behavior of breaching of contract, the existence of punitive liquidated damages is necessary.The third part: the applicable and adjust conditions of punitive liquidated damages. The applicable conditions of punitive liquidated damages should be stricter than the general conditions of liability for breach of contract. And the law should make necessary regulation punitive liquidated damages.When the amount exceed 20%, the surpassing part will be invalid. When the court adjusts the amount of punitive liquidated damages, variety of factors should be considered.