Research On The Legal Issues Of Liquidated Damages Adjustment

The academic community has not formed a unified view on the nature of liquidated damages.Some of them take the function of liquidated damages(guarantee function,burden of proof reduction function)as the standard to distinguish the nature of liquidated damages(whether it is agreed that it can be claimed together with the actual performance and damages),and take part of the adjustment reference elements(fault degree,damage type and size)as the constituent elements of liquidated damages liability.Normally,the courts do not distinguish the nature of liquidated damages when adjusts the liquidated damages."Guiding Opinions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Civil and Commercial Contracts under the Current Situation(hereinafter referred to as Guiding Opinions on Several Issues concerning the Trial of Cases of Disputes over Civil and Commercial Contracts)provides for the premise of penalty due to the parties insert a clause on liquidated damages in a contract which are excessively higher than the losses caused by the breach of contract or are very punitive,however,in judicial practices,the adjust condition of liquidated damages is not being strictly conducted.From the perspective of adjust standards,actual loss,can get profit loss,or the actual loss and can get 30% of the profit loss combined with the same period,bank loan interest rates or lending rate four times,the folk lending rate is 24% and other adjustment standards are also used in practices.The Interpretation II of the Supreme People’s Court of Several Issues concerning the Application of the Contract Law of the People’s Republic of China(hereinafter referred to as The Interpretation II of the Application of the Contract Law)sets up "30% of the actual loss" to adjust the standard.However,that does not prevent the courts from using other applicable standards,which has seriously damaged judicial credibility.In addition,regarding the burden of proof and the exercise of the judge’s power of interpretation,there are also circumstances where different judgement could be made with respect to the same typeof cases.In view of the above problems,this paper will be divided into three parts:The first part illustrates the problem of liquidated damages adjustment in judicial practice.Firstly,through the case analysis summarizes that the substantial issues of the adjustment of the penalty due to breach of contract in China,including that the judge does not distinguish the nature of liquidated damages when adjusting the liquidated damages due to the judge’s inadequate understanding of the nature of the breach of contract damages;the chaos of the judgement standards of the nature of the breach of contract damages and its functions;the chaos of the constituent elements and adjustment references of the breach of contract damages and the chaos of specific adjustment standards of the breach of contract damages.Moreover,with respect to the procedural part,the issues include the inversions and transfers of the burden of proof and the wide scope of the judge’s power of interpretation.The second part illustrates the theoretical analysis of liquidated damages adjustment rules.The first part is the relevant legal provisions and comments on liquidated damages adjustment rules.Secondly,it discusses the nature of liquidated damages: the theory of compensation,the theory of punishment,the dual theory of compensation and punishment.It introduces the application of liquidated damages adjustment rules in other countries from two aspects of civil law system and common law system.Thirdly,it analyzes the reference factors of liquidated damages adjustment in detail: fault degree,performance degree,loss type,fairness principle and good faith principle,etc.Fourthly,it analyzes the distribution rules of burden of proof and the scope of judge’s interpretation right in the adjustment of liquidated damages.The third part puts forward suggestions on the improvement of the adjustment rules of liquidated damages from two aspects of legislation and justice.Legislative perfection includes the determination of the nature of liquidated damages according to whether the parties agree that liquidated damages can be used together with the actual performance and damages;secondly,the adjustment reference elements of liquidated damages should be added to the adjustment of liquidated damages,and the relevantadjustment reference elements should be systematized;when applying the adjustment standard of liquidated damages,there are sequence requirements,first of all,the liquidated damages should be determined as "too high",then according to the degree of fault to decide whether to adjust,and finally combined with various elements to adjust.Judicial perfection includes two aspects: the distribution of the burden of proof and the exercise of the judge’s right of interpretation: the transfer of the burden of proof belongs to the judge’s discretion and is also an unavoidable phenomenon in the judicial judgment,but some courts directly use the inversion of the burden of proof without legal basis.The law should be clear about this,and the judge should be strict in the exercise of the right of interpretation.