爱华网Liquidated Damages Clause under Australian Lawand Chinese Law
By JZ
The parties may agree to a liquidateddamages clause which provides for a specified sum as damages on thebreach of one or more of the contractual obligations. Upon the occurrence of breach orcertain events (e.g., delay in project delivery) the defaultingparty will pay to the non-defaulting party the specified sum asdamages. One obviousbenefit of such clause is that the party claiming for the damagesdoesn’t need to prove the extent of actual damages, although theother party may attempt to dispute the validity of the liquidateddamages on the ground that it doesn’t represent a genuinepre-estimate of the loss sufferable by the non-defaulting party andthe non-defaulting party claiming for damages may then need toprove the relevant clause represents a genuine pre-estimate of thedamages at the time of entering into the contract (not at the timeof breach or loss being suffered). Where such a term is, in theopinion of the court, a genuine pre−estimate of the loss sufferableby the non-defaulting party on breach, such a clause is enforceableas it stands. That is, the non-defaulting party receives ascompensation the amount specified in the clause whether or not thedamages which otherwise would have been recoverable at common laware greater or lesser than the specified amount(Seefootnote). Liquidated damages clause will be unenforceable if thecourt finds that it constitutes a penalty. The above is the legal position underAustralian law.
Chinese law doesn’t recogniseliquidated damages in the same way as in common lawjurisdiction. Commentators have argued about thenature of liquidated damages and whether it is a penalty orcompensatory clause. The general view seems to be that liquidateddamages has both penalty and compensatory nature.The specific rules relating to liquidateddamages under the PRC Contract Law are also quite different fromthat under common law, in the sense that when a party who suffersloss different from the specified amount of liquidated damages, theparties may seek to either reduce or increase the specified amountof liquidated damages. Clause 114 under theContract Law provides that the contracting partiescan agree on the amount of damages payable upon breach of thecontract, or the measure for calculating the damages. Where the agreed damages is lower thanthe actual loss, the party concerned may apply to the court or thearbitration tribunal to increase the damages. If the agreed damages is excessively higher than the actual loss, the party may applyto the court or arbitration tribunal to appropriately reduce the liquidated damages. The differencein requirements for the increase or reduction of liquidated damagesare in line with the combined compensatory and penalty nature ofliquidated damages under Chinese law. For example, it is only when theliquidated damages is excessively higher than the actual loss theparty can seek to reduce the amount of liquidated damages, and theamount will be appropriately reduced only, which implies that theliquidated damages after the reduction may still be higher than theactual loss. There is no similar “excessive” and “appropriate”requirements for an application to increase the liquidated damageswhen it is serving the compensatory function.
The Interpretation onSeveral Issues Concerning the Application of the Contract Law(II) (“Interpretation”) issued in April 2009provides some guidance concerning theadjustment of liquidated damages clause. It provides that if a party appliesfor an increase to the liquidated damages in accordance with Clause114 of the Contract Law, the increased liquidated damages shall notexceed the actual loss, and no additional damages will be awardedafter the increase to the liquidated damages. For any application to reduce theliquidated damages for the reason that the liquidated damages isexcessively higher than the actual loss, the court will generallydeem the liquidated damages as excessive if it is 30% or morehigher than the actual loss. When considering an application forthe reduction of liquidated damages, the court will base theadjustment on the actual loss, but shall also take intoconsideration factors such as the performance of contract, degreeof fault of the parties concerned, and expectedbenefit.
It can be argued that the liquidateddamages under Chinese law provides less certainty as the amount ofdamages may be subject to adjustment, largely depending on theamount of actual loss resulting from the breach.
Therefore, when dealing withliquidated damages in contract involving Australian and Chineseparties, it is important to notice the difference in the concept ofliquidated damages in these two different legal systems, understandwhat kind of liquidated damages clause you are committing to, andassess your risk exposure accordingly.
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《合同法》
第一百一十四条 当事人可以约定一方违约时应当根据违约情况向对方支付一定数额的违约金，也可以约定因违约产生的损失赔偿额的计算方法。
约定的违约金低于造成的损失的，当事人可以请求人民法院或者仲裁机构予以增加；约定的违约金过分高于造成的损失的，当事人可以请求人民法院或者仲裁机构予以适当减少。
当事人就迟延履行约定违约金的，违约方支付违约金后，还应当履行债务。
最高人民法院关于适用《中华人民共和国合同法》若干问题的解释（二）
第二十八条 当事人依照合同法第一百一十四条第二款的规定，请求人民法院增加违约金的，增加后的违约金数额以不超过实际损失额为限。增加违约金以后当事人又请求对方赔偿损失的人民法院不予支持。
第二十九条 当事人主张约定的违约金过高请求予以适当减少的，人民法院应当以实际损失为基础，兼顾合同的履行情况、当事人的过错程度以及预期利益等综合因素，根据公平原则和诚实信用原则予以衡量，并作出裁决。
当事人约定的违约金超过造成损失的百分之三十的，一般可以认定为合同法第一百一十四条第二款规定的“过分高于造成的损失”。
Footnote: ContractLaw Commentary, CCH Australia Pty Ltd, 2009, at[57−800].
