The Research On The Problems Of The Application Of Punitive Liquidated Damages

As a private punishment for the non-performance of the debt,the punitive liquidated damage is widely used in practice for its function of performance guarantee.China’s legislation does not adopt the theory of differentiating liquidated damages into compensatory and punitive liquidated damages,which leads to disputes between theory and practice on how to define and regulate punitive liquidated damages.In judicial practice,the courts are cautious about the application of punitive liquidated damages and exist problems of confusions of the definite standards of the punitive liquidated damages and excessive judicial intervention,resulting in failure of playing its function of performance guarantee.The existence of the above-mentioned practical problems still have to be attributed to the drawbacks on the system of the judicial adjustment in liquidated damages and the fact that the nature of the liquidated damages remains unclear.The system of the judicial adjustment in liquidated damages emphasizes the investigation of actual losses,resulting in the punitive liquidated damages being essentially reduced to the prejudice of damages.Regarding the nature of liquidated damages,although the theory and judicial practice both admit that it can be considered to have the dual nature of compensation and punishment,however,there’re fundamental differences in the embodiment of them.The identification of the concept of punitive liquidated damages should be based on the intention behind the terms,rather than rigidly examining the form of the terms and actual losses.In addition,it should be recognized that the performance guarantee function of the punitive liquidated damages has legitimacy and its institutional value.In terms of the adjustment of the amount of punitive liquidated damages,it is necessary to abandon the “loss comparison” approach and consider all the relevant elements.