The Legal Research On The Judicial Adjustment Rules Of Liquidated Damages

The parties of the contract made a stipulated poena to avoid the burden of proof in Roman Law.There is no need for the creditor to prove the loss resulting from the breach to get compensated by the debtor.Also it can function as a warranty for the performance of the contract that the debtor will get relief from the obligation in via of paying the stipulated amount of money,which in this case it subordinate to the main contract.Therefore,the liquidated damages plays a dual role in the contract,compensating the loss of the creditor and ensuring the performance of the contract.The Canon Law hold that the purpose of the contract is to protect and maintain morality,featuring as the balance of the loss and equality.It is questionary in the judicial judgement of the liquidated damages,when the stipulated amount comes out much higher than the loss under the breach of the contract.The adjustment of liquidated damages justifies it as a remedy for breach of the contract.Here we will analyze the rule of the judicial adjustment rules of liquidated damages based on the running regulations,judgements and judicial interpretations.The liquidated damages include two types,the compensatory liquidated damages and punitive liquidated damages,and it shall apply to different adjustment rules based on the two different types.There is no distinguishment of the liquidated damages in the legislation in our country.We can see that the legislature and judicial organ are inclined to determine it as compensatory liquidated damages.Chapter one emphasizes on the history of the development of liquidated damages.At first it worked as poena in Roman law,and then as the compensatory agreement in Classical Law,until the period of Canon Law it occurred the theory of judicial adjustment rules of liquidated damages.On the one hand,the stipulated liquidated damages is the consequence of the “will theory”,which prevents the “effective breach” paradox;on the other hand,the adjustment rules can justify the unjust enrichment in accordance with the fair principle.Our legislatures need to make a choice between the two aspects.Chapter two illustrates the different opinions on the criteria of distinguishing the different types of liquidated damages in three aspects.In comparison with the foreign legislation,judicial adjustment rules of liquidated damages shall base on the loss resulting from the breach and make sure the remedy take the parties' will into consideration while determining the type of liquidated damages.In addition,the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China(2)"(Law Interpretation [2009] No.5)(Hereinafter refers to as the "Contract Law Interpretation(2)")does not breakthrough judicial adjustment rules of liquidated damages,but provides judges with more clear and specific references.Chapter III mainly analyses the specific factors when judges determine whether apply the judicial adjustment rules of liquidated damages,and to what degree will be the proper amount.In particularly,there is a discrepancy in the definition of loss between legislation and judicial interpretation.The loss should include not only the actual loss but also the loss of anticipated benefits.At the same time,it is no necessary to consider the predictable principle into consideration in liquidated damages.The judges shall apply the adjustment rule of liquidated damages according to the losses occurred in default,the subjective of the breacher,and the situation of the performance of the contract.Punitive liquidated damages is different from the compensatory liquidated damages,even when there is no loss,still the debtor shall be liable for paying the stipulated amount of money to the creditor.Where the liquidated damages are reduced,the debtor shall assume the burden of proof that the stipulatedamount of the money is much higher than the loss of creditor.After the termination of the contract,the liability for liquidated damages shall still work as a remedy for the breach of contract and the parties may choose to apply the penalty or deposit for it.