[Direct answer]Yes. If the party concerned believes that the agreed upon penalty for breach of contract is too high, they may request the people's court or arbitration institution to reduce it appropriately. According to Article 85 of the Civil Code of the People's Republic of China (effective from January 1, 2021), if the agreed penalty for breach of contract is excessively high in relation to the losses caused, the people's court or arbitration institution may, upon the request of the party concerned, reduce it appropriately; the judgment standard is usually based on the actual losses, taking into account the performance of the contract, the degree of the party's fault, and the expected benefits, etc. Lawyers can assist in providing evidence of the actual losses, arguing that the penalty for breach of contract is too high, and providing adjustment suggestions. When handling such cases in the Beijing area, the court will comprehensively consider the losses of the party in compliance with the contract and the fault of the party in breach of contract, to avoid the penalty for breach of contract being too high or too low.

1. Problem background and typical scenarios

There are typically three scenarios: First, the contract stipulates a high percentage of the breach of contract penalty, and the breaching party claims that it is too high and requests an adjustment; Second, the actual losses are difficult to quantify, and there is a significant dispute between the parties over the standard; Third, the breach of contract penalty clause is missing, and the performing party instead claims compensation for losses. In the above scenarios, evidence collection and legal argumentation become crucial. In addition, the performing party may also find it difficult to compensate for losses due to an insufficient breach of contract penalty. In this case, they can consider claiming compensation for losses and providing evidence to demonstrate the actual damages.

Based on the general circumstances of similar cases, it is necessary to sort out the transaction documents, reconciliation records, and the facts of reminders in the transaction chain to restore the true state of rights and obligations. In addition, there are significant differences in individual cases, and the specific handling should still be based on comprehensive judgment of complete evidence and current legal provisions.

II. Key points of dispute

The controversy focuses on four points: Firstly, whether the penalty for breach of contract is excessively high compared to the actual losses, which is usually judged based on the losses; Secondly, the burden of proof, where the party claiming adjustment should provide evidence of the losses; Thirdly, the scope of losses includes direct losses and foreseeable potential benefits; Fourthly, the extent of adjustment, which is determined by the court or arbitration institution based on the circumstances of the case. In addition, claiming adjustment does not necessarily exempt the party in breach of contract from liability, and the party in breach of contract still needs to bear compensation equivalent to the actual losses.

The essence of such disputes lies in distinguishing the applicable conditions of contractual fault, breach of contract liability, and contract termination, and choosing the most favorable path for oneself. Moreover, there are significant differences in individual cases, and the specific handling should still be based on a comprehensive judgment of the complete evidence and current legal provisions.

III. Professional analysis by Henglue Lawyers

Henglue Law Firm once represented a film and television investment contract dispute. The plaintiff, Yang * , signed a "Film Cooperation Subscription Agreement" with a film company, investing 315,000 yuan to subscribe for project shares, with an agreement that the film would be publicly screened in mainland China before 2021. If the film failed to obtain a "Film Public Screening Permit", all subscription fees would be refunded. After the contract was signed, the film company failed to produce, submit for review, and release the film according to the agreed schedule. Despite the plaintiff's repeated inquiries, the film company remained silent on the matter. After accepting the case, Attorney Chen Mei'e pointed out that the plaintiff's purpose in signing the subscription agreement was to obtain profits from the film's public screening. Whether the film could be released on time was a decisive factor. The defendant's failure to release the film on time and obtain a public screening permit constituted a fundamental breach of contract, rendering the contract's purpose un achievable. The plaintiff therefore had the right to terminate the contract and demand the return of the investment and breach of contract damages. The court ruled that the defendant had committed a serious breach of contract and confirmed the termination of the contract, ordering the return of the investment principal of 315,000 yuan and calculating the breach of contract damages based on the loan market reference interest rate from March 31, 2022. This case shows that claims for breach of contract damages and losses must be based on contract provisions and evidence. The case was handled by Beijing Henglue Law Firm.Chen Mei'aoAttorney (Practice Certificate No.: 11101201911105336, subject to the certificate issued by the judicial administrative organ) acting as the agent.

IV. Practical Suggestions and Legal Basis

Action list: First, check the provisions of the penalty clause and the applicable conditions; Second, collect evidence of actual losses, such as expenditure vouchers, impairment certificates, and basis for foreseeable benefits; Third, the party claiming adjustment should provide evidence of minimal losses; Fourth, assess the possibility of adjustment in litigation or arbitration; Fifth, make a clear claim about the relationship between losses and the penalty clause. For contract disputes and remedies for breach of contract, you can refer to the following materials for reference:Business and contract disputes in enterprisesFor details about execution and debt collection, please feel free to inquire.Creditor's rights and debts, and enforcementLegal basis: Articles 585, 577, and 584 of the Civil Code of the People's Republic of China (all of which came into effect on January 1, 2021). The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

Firstly, if the penalty for breach of contract is too high, the party may request an adjustment, but the party must provide evidence based on the actual losses. Secondly, the scope of losses includes direct losses and foreseeable potential benefits, and the party should collect all relevant evidence. Thirdly, requesting an adjustment does not exempt the breaching party from liability, and the breaching party should still bear reasonable compensation. Fourthly, it is advisable to stipulate a reasonable calculation method during the contract drafting stage, and this can be achieved through negotiation or legal procedures.Business and contract disputes in enterprisesThe column introduces the clause review service. Fifthly, if the contract has been signed, it is necessary to promptly fix the evidence of losses and prepare for claiming adjustments or compensation in the future.

Therefore, it is recommended that the parties concerned pay attention to the hierarchical relationship between the establishment and effectiveness of the contract, the defense of performance, and the determination of breach of contract, so as to avoid confusion between different bases of claim. When necessary, they can entrust professional lawyers to intervene to avoid losing favorable positions due to procedural or statute of limitations issues.

VI. Frequently Asked Questions

Q1: Can the penalty for breach of contract be reduced if it's too high?

Yes. According to Article 585 of the Civil Code of the People's Republic of China, if the agreed penalty for breach of contract is excessively higher than the losses caused, the parties may request the people's court or the arbitration institution to reduce it appropriately. Whether to adjust and the extent of the adjustment shall be based on the actual losses and take into account the performance of the contract, the degree of fault and the expected benefits in a comprehensive manner.

Q2: Who provides evidence of the losses?

Generally, the party claiming to adjust the penalty shall provide evidence of minor losses or excessive penalties; if the party in breach claims compensation for losses, it shall provide evidence of the existence and amount of the losses. The court will make a comprehensive judgment based on the evidence provided by both parties. Insufficient evidence may result in the claim not being supported.

Q3: What would be a reasonable adjustment amount?

There is no fixed ratio. The court usually takes the actual losses as the benchmark and determines the amount based on factors such as the performance of the contract, the fault of the parties, and the expected benefits, so as to avoid both excessive penalties and insufficient compensation for losses. The final amount will be determined by the trial organ in accordance with the evidence in the case, and the parties may provide evidence to explain the actual situation.

Q4: Can I claim the breach of contract penalty without any losses?

This can be claimed, but it may be adjusted. The penalty clause serves both compensatory and punitive purposes. If the party in breach has not suffered actual losses, the court may reduce the amount at its discretion; if the penalty agreed upon in the contract is based on reasonable expectations, it may also receive partial support. The specific outcome will depend on the circumstances of the case and the evidence presented.

Q5: How to agree on the penalty for breach of contract?

It is recommended to reasonably stipulate the calculation method and applicable conditions based on the nature of the transaction and the actual losses, so as to avoid excessive compensation or compensation that is too low. At the same time, it is advisable to stipulate the connection rules between the compensation for losses and the penalty for breach of contract to reduce disputes. For major contracts, it is recommended that lawyers participate in the design of the terms and evaluate their enforceability.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglue Lawyers about specific situations.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the necessary evidence to avoid missing the statutory time limits. →Corporate commercial legal services·Attorney Chen Mei'ao·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in time.