An Empirical Study On Judicial Reduction Regime Of Liquidated Damage

Judicial adjustment of liquidated damages has attracted much attention and is controversy both in the field of legal theory and judicial practice.The provisions of liquidated damages judicial adjustment in the current law system of China is relatively general and ambiguous,which puts forward extremely high requirements for the use of judges' discretion.In order to avoid the judicial injustice caused by significant differences in the judicial adjudication results,judicial personnel are required to have a thorough understanding of the norms of judicial adjustment of liquidated damages,which further requires to understand and master the keys of following aspects: the theoretical basis and value basis of liquidated damages discretion,the functional orientation of liquidated damages,and the factors to be considered in individual cases of liquidated damages judicial reduction(which include the loss caused by breach of contract,the performance of the contract,the degree of fault of the parties,the principle of fairness and good faith)as well as the initiation of judicial reduction of liquidated damage and the distribution of burden of proof from procedure perspective.The principle of autonomy in private law is embodied in the principle of freedom of contract in contract law.The judicial reduction of liquidated damages reflects the breakthrough of the principle of freedom of contract by compulsory norms of law,and the adjustment of the contractual provisions in liquidated damages originally agreedby the parties,in order to realize the fairness and justice of the contract.It is the value basis of this regime to balance the freedom of contract and fairness and justice.In terms of function,there are two aspects of liquidated damage: compensatory function and punitive function.Since the Middle Ages,the punitive function of liquidated damages had been restrained under the influence of the European Church's idea of "prohibiting gains".After more than one thousand years of development and evolution,the Continental Law system eventually accepted the dual-function position of liquidated damages,though there are differences in the proportion of dual-function distribution between different countries under the Continental Law system.The current law China has some inclination to the compensatory function in the aspect of the proportion of dual functions.It adopts "compensation is the main function,punishment is the supplement",that is,to admit the punitive function while giving priority to the compensatory function.In specific case judgment,for the judicial reduction of liquidated damages,judges need to consider the following factors including the loss caused by the breach of contract,the performance of the contract,the degree of fault of the parties,the principle of fairness and the principle of good faith.Losses caused by breach of contract should include actual loss and losses of attainable interest.Compensation for the loss of attainable interest should be strictly controlled in combination with the rules of predictability,derogation and offset of gains and losses,so as to avoid the unlimited expansion of losses and make the debtor face excessive debt burden.Judging from the performance of the contract,there is no legal distinction between judicial reduction for excessive liquidated damages and partial performance.Judicial reduction in the situation of partial performance of contract will be treated by applying the same judicial reduction regimes for excessive liquidated damages and the loss caused by breach of contract should still be considered as the basis for measurement.Considering the performance of the creditor,the creditor's inactive performance of the contract should not be regarded as a negative factor in the process of judicial reduction.The different situations should be distinguished between the creditor's inactive performance under performance right of defense and thecounterclaims due to the breach of contract mutually by both parties.The deferred performance of monetary debt is regulated by several legal rules.It is necessary to distinguish the purposes,functions and scope of application of the statutory limit of interest,the statutory deferred penalty and the judicial reduction regime of liquidated damages.The statutory limit of interest stipulates the upper limit on the allowable amount of interest and liquidated damages for deferred payment;the role of statutory deferred penalty is limited to be applied in disposal of deferred payment in the absence of mutual agreement of the parties in advance;and the judicial reduction of liquidated damages applies to the situation agreed on interest and deferred liquidated damages in advance.Considering the degree of the fault of the parties,the judicial cognizance of liability for breach of contract generally follows the principle of strict liability system.In the process of judicial reduction of liquidated damages,the degree of the fault of the parties should be taken into account,so as to play a warning role in supervising the implementation of the contract as well as to realize the fairness and rationality in specific case judgment.Taking the principle of fairness and honesty and credit into consideration,the principle of fairness should take into account formal fairness and substantive fairness.Implementing formal fairness should mainly consider whether there is a clear gap between the contracting parties in contracting capacity,trading experience,industry status and other aspects.The implementation of substantive fairness is mainly to avoid serious imbalances in the judgement results.The debtor's economic situation and the balance of creditors' gains and losses should be comprehensively measured in specific cases.Judicial reduction of liquidated damages is the embodiment of the principle of good faith.When considering the principle of good faith in judicial discretion,the rule of derogation can be considered.Procedural justice guarantees the realization of substantive justice.The procedural essentials involved in the process of judicial reduction of liquidated damages mainly include the initiation of judicial reduction of liquidated damages and the allocation of burden of proof in the judicial reduction of liquidated damages.The laws of People's Republic of China adopts the mode of judicial reduction of liquidated damages on the basis of the debtor's application,with the intervention of the judge'sinterpretation of the regime.The rules of interpretation should be controlled and applied in a prudent way.The preliminary burden of proof for judicial discretion of liquidated damages shall be borne by the debtor,and thereafter,the burden of proof shall be dynamically distributed between the creditor and the debtor in the course of debate and cross-examination at court.The paper is divided into four chapters.Chapter One: the Theoretical Basis and Value Basis of the Reduction Regime of Liquidated Damages;Chapter Two: the Dual Function of Liquidated Damages and the Judicial Practice in the Discretionary Reduction of Liquidated Damages in China;Chapter Three: the Consideration Factors of the Judicial Reduction of Liquidated Damages;Chapter Four: the Procedural Essentials of the Application of the Judicial Reduction of Liquidated Damages.