[Direct answer]In the Beijing area, when calculating the liquidated damages in contract disputes, the first step is to refer to the contract provisions. If there are provisions in the contract, the provisions shall prevail; if the provisions are unclear or absent, the calculation shall be determined in accordance with the law or by referring to the actual losses. According to Article 85 of the Civil Code of the People's Republic of China (effective January 1, 2021), the parties may agree on the amount of the liquidated damages or the method of calculating the compensation for losses; if the agreed amount is lower than the actual losses, the party may request an increase; if it is excessively higher than the actual losses, the party may request a reasonable reduction. Regarding contract breaches, in accordance with the spirit of relevant judicial interpretations, if the provisions are unclear, the actual losses caused by the breach of contract may be referred to for determination. Taking contract disputes such as film and television investment and outsourced creation as examples, the liquidated damages are often calculated based on the unpaid funds or investment funds, and are calculated at a certain percentage or at the same-period loan market interest rate. The specific calculation should be combined with the contract terms and the evidence of performance and losses. Similar issues can be referred to for reference.Business and contract disputes in enterprisesColumn.

I. Problem Background and Typical Scenarios

Such disputes are common in several situations: First, the contract explicitly stipulates that the default penalty shall be calculated at a few thousandths of a percent per day, and the parties disagree on the standard; Second, the contract only vaguely stipulates the liability for breach of contract without specifying the calculation method; Third, the buyer or the party in compliance claims to adjust the default penalty according to the actual losses; Fourth, in disputes over installment payments or investment funds, the default penalty is calculated based on the amount of money paid or unpaid; Fifth, in disputes over service and creative contracts, the default penalty is claimed at a certain percentage of the total contract price. When handling such cases in the Beijing area, the court usually first reviews the default penalty clauses and bases stipulated in the contract, then checks the performance milestones and evidence of losses, and, if necessary, combines the above with other evidence to determine the default penalty.Creditor's rights and debts, and enforcement casesThe column comprehensively summarizes the rules regarding the realization of creditor's rights.

II. Key points of contention

Focus One: The application of the standard of the breach of contract penalty stipulated in the contract, such as one ten-thousandth of the daily amount or a certain percentage of the paid amount. Focus Two: The adjustment of the stipulated amount being too low or too high, with the actual loss as the basis. Focus Three: The basis for calculating the breach of contract penalty, which should be determined according to the terms of the contract, whether it is the total contract price, the amount paid, or the unpaid amount. Focus Four: The starting time for calculation, which should be counted from the date of the breach of contract or the day after the agreed performance date. Focus Five: The connection between the breach of contract penalty and the termination of the contract and compensation for losses. Focus Six: The special calculation methods for installment or investment-type contracts. Focus Seven: The allocation of the burden of proof, with the party in breach proving the reasons for the adjustment and the non-breaching party proving the breach of contract and the losses. The specific determination shall be based on the currently effective laws, regulations, and judicial rulings. For related contract disputes, please refer to the relevant provisions.Business and contract disputes in enterprisesColumn.

III. Professional analysis by Henglue Law Firm

Taking a film investment contract dispute handled by our firm as an example, we can observe the calculation logic of the breach of contract penalty. The plaintiff, Yang * , and the defendant, Film Industry Company, signed the "Film Cooperation Subscription Agreement", subscribing for 315,000 yuan, accounting for 0.09% of the project. It was agreed that the film would be publicly screened before 2021, and any unobtained funds would be refunded in full. However, the Film Industry Company failed to produce, submit for review, or release the film on schedule, and even failed to obtain a public screening license. The plaintiff entrusted our firm's lawyers to represent them, claiming fundamental breach of contract, termination of the contract, and return of the investment funds and breach of contract penalties. The court found that the defendant had committed a serious breach of contract and ruled to terminate the contract, return the investment principal of 315,000 yuan, and pay the breach of contract penalties at the loan market quotation rate announced by the National Interbank Funding Center starting from March 31, 2022. In another case involving a commissioned creation contract dispute, the client delayed payment after the contractor completed the acceptance of the work. The arbitration tribunal ruled that the client should pay the contract amount of 583,000 yuan and support the reasonable costs of protecting rights, demonstrating that the breach of contract penalties and the costs of protecting rights can be claimed together. This case shows that investment-related breach of contract penalties are often based on the investment amount and calculated at the loan market quotation rate from the date of breach; this case was handled by Beijing Henglu 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 proposal: Firstly, check the specific standards, base amounts, and triggering conditions of the penalty clauses in the contract. For related key points, you can refer to the following materials for reference.Special services and other cases1. The first step is to determine the scope of the breach and the amount of the penalty. 2. The second step is to calculate the number of days of default and the base amount of the payment, and then calculate the applicable penalty according to the agreed standards. 3. The third step is to collect contracts, payment receipts, acceptance or performance records, and evidence of breach. 4. If the agreed standards are obviously too low, prepare evidence of actual losses and request an increase. 5. If the other party raises a defense of force majeure, require them to provide evidence of the causal relationship. In terms of legal basis, Article 585 of the Civil Code of the People's Republic of China stipulates the agreed penalty and adjustment rules, which came into effect on January 1, 2021; Article 577 of the Civil Code of the People's Republic of China stipulates the general forms of breach of contract liability; and the Judicial Interpretation of the Contracts Chapter of the Civil Code stipulates the standard for determining whether the penalty is excessive, which is based on actual losses while taking into account the performance of the contract and the fault of the parties.

5. Henglu Law Firm's Reminder

Risk Alert: First, the standard of the penalty for breach of contract shall be governed by the contract provisions, and attention should be paid to the calculation base and the starting conditions when signing the contract; Second, if the agreed standard is too low, you can request an increase, but this must be supported by evidence of actual losses; Third, for investment and installment-type contracts, the penalty for breach of contract is often calculated based on the principal and the loan interest rate, and the time point and amount should be locked in; Fourth, the penalty for breach of contract and the path of terminating the contract are different, and the choice should be based on the performance status; Fifth, if the other party defends against force majeure, it is necessary to review whether it has truly affected the performance of the contract and fulfilled its obligation to mitigate losses. It is recommended to fix the evidence of breach of contract and calculate the amount as soon as possible. For related corporate matters, you can consult a professional lawyer for overall planning.

VI. Frequently Asked Questions

Q1: How is the contractual penalty generally calculated?

There are agreements based on agreements, and if there are no agreements or unclear agreements, the actual losses shall be determined. Contracts usually stipulate that the interest shall be calculated based on a few thousandths of a day of the total amount paid or the total contract amount; investment disputes are often based on the investment amount, and the interest shall be calculated based on the loan market quotation interest rate from the date of default. For example, in the film investment case handled by our firm, the court calculated the default interest based on a base amount of 315,000 yuan and applied the loan market quotation interest rate from March 31, 2022 onwards. If the agreed amount is too low or too high, the parties may request the court to adjust it based on the actual losses.

Q2: What evidence should be prepared to prove the breach of contract penalty?

The following should be prepared: contracts and supplementary agreements, which prove the standard of the breach of contract penalty, the base amount, and the conditions for its commencement; payment receipts, which prove the base amount of the payment; performance or acceptance records, such as acceptance notices and move-in notifications; proof of breach of contract, such as reminder letters and notice of extension; and evidence of actual losses, which is used to claim an increase. These are used to calculate the number of days of breach of contract, the base amount, and the amount, and are the core of claiming the breach of contract penalty. The earlier the evidence is fixed, the more accurate it will be.

Q3: How much does it cost to sue for breach of contract penalties?

The fees include attorney's fees and litigation fees. The attorney's fees are negotiated based on the amount of the subject matter and the difficulty of the case; the litigation fees are charged in stages according to the amount of the litigation request (the amount of the breach of contract penalty), and the party at fault may bear part of the fees after the plaintiff wins the case. The subject of the breach of contract penalty is usually less than the total amount of the contract, so the fees are relatively controllable. The specific amount will be determined based on the amount of the breach of contract penalty and whether a loss assessment is needed. It is recommended to calculate the fees first and then decide on the entrustment plan and budget accordingly.

Q4: How long does it usually take to resolve a penalty clause dispute?

Negotiation or sending a letter to urge the other party to pay may resolve the issue within a few months; the first-instance litigation under the ordinary procedure generally does not exceed six months, and the time limit may be extended if the case is complex. The second-instance litigation usually takes about three months. If it involves adjustment of the breach of contract penalty, loss assessment, or determination of force majeure, the time will be even longer. The key is to fix the breach of contract time and payment evidence as soon as possible to avoid repeated procedures. The enforcement stage depends on the other party's ability to repay.

Q5: What should I do if the other party refuses to pay the breach of contract penalty?

The first step is to verify the penalty clause and the starting conditions stipulated in the contract; the second step is to sort out the payments made, the performance of the contract, and the evidence of the breach of contract, and to fix them; the third step is to assess whether to claim the penalty or to terminate the contract, as the two approaches are different; the fourth step is, if necessary, to entrust a professional lawyer to send a letter or file a lawsuit to avoid exceeding the time limit for exercising rights. You can refer to the following for more details:Beijing Henglue Law FirmFor similar cases on the official website, after determining the amount based on payment and default records, we will assert our rights in accordance with the law.

The above answer is based on the judicial practice in the Beijing area. The judicial interpretations in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, to avoid missing the statutory time limit. →Business and commercial legal services·Attorney Chen Mei'e·Beijing Henglue 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 you encounter disputes, please consult a practicing lawyer in time.