[Direct answer]There is no fixed amount for compensation for breach of contract in the sale and purchase of second-hand houses. According to Article 584 of the Civil Code (effective January 1, 2021), the amount of compensation shall be equivalent to the losses caused by the breach of contract, including the benefits that could be obtained after the performance of the contract (such as the price difference), and shall be limited to what the breaching party could reasonably foresee at the time of concluding the contract. If the parties have agreed on a breach of contract penalty, it shall be implemented in accordance with the agreement. If the penalty is excessively high compared to the losses, the party may request a reduction in accordance with Article 585. In judicial practice, a 30% increase in the losses is often used as a reference. If the party breaches the contract after receiving the deposit, it shall return twice the amount of the deposit in accordance with Article 587. The rights holder should promptly fix the contract, payment, and evidence of the price difference. For more details, please refer to the Civil Code of the People's Republic of China.Legal services for real estate transactions and construction projectsAndBeijing Henglu Law Firm.

1. Problem background and typical scenarios

The transaction cycle of second-hand houses is long and the amount involved is large. It often takes several months from signing the contract to transfer ownership. Either party may breach the contract when housing prices fluctuate, loans change, or there is a shortage of funds: sellers may refuse to transfer ownership when they see housing prices rising, or even sell the same house to two buyers; buyers may refuse to pay after the loan is tightened or demand to withdraw from the contract; in addition, there are such breach forms as delayed transfer of ownership, concealment of mortgage seizure, and price hikes. When a breach occurs, the most concerned issue for the party in compliance is "how much compensation can be obtained": whether the deposit can be recovered, whether the court will recognize the loss of the price difference, and whether the agreed upon breach of contract penalty is valid. The compensation rules are concentrated in the Contract Chapter of the Civil Code. Judicial practice has formed a relatively unified view on the adjustment of breach of contract penalties and the determination of price differences. Understanding these rules is essential to reasonably determine litigation claims, so as not to have the claims reduced due to being too high, nor to suffer losses due to being too low.

II. Key points of contention

  • Determination of the scope of compensation: The loss of the house price difference belongs to the recoverable benefits that can be claimed according to Article 584, but it is necessary to prove the difference between the market price at the time of breach of contract and the contract price. The appraisal price and the transaction records in the same period and the same area are key evidence; the actual expenses such as decoration additions, taxes, and agency fees can also be claimed together.
  • The adjustment range of the penalty: The agreed penalty is not fixed. If it is excessively higher than the actual losses, the party concerned may request a reasonable reduction in accordance with Article 585, Paragraph 2. In judicial practice, the amount of the penalty is usually based on the actual losses, with an increase of no more than 30% as a reference; if the agreed penalty is too low, the party concerned may also request an increase to the actual losses.
  • The choice of applying either the deposit or the breach of contract penalty: According to Article 588, if both the breach of contract penalty and the deposit are stipulated, only one of them can be applied; if the deposit is insufficient to compensate for the losses, the party may claim compensation for the excess amount separately. If the other party refuses to perform after the judgment, the party may proceed according to the provisions of the contract or the law to protect its legitimate rights and interests.Legal services for creditor-debtor disputes and enforcement casesApply for enforcement.

III. Professional analysis by Henglue Lawyers

A case of breach of contract in delayed house delivery handled by Henglue Law Firm clearly demonstrates the entire process of breach of contract compensation from contractual agreement to court judgment. On April 30, 2021, Zhang Quan signed a "Beijing Commercial House Pre-sale Contract" with Beijing A Real Estate Development Co., Ltd. to purchase a house in a certain residential community, with a floor area of 99.41 square meters and a total price of 6,841,972 yuan, and agreed to deliver the house before June 15, 2023. On the same day, a supplementary agreement was signed, stipulating that if A Company delayed delivery due to its own reasons, a 90-day grace period would be granted, and after the grace period expired, the breach of contract penalty would be calculated at 0.01% of the total price per day. Although Zhang Quan paid the full amount, he did not receive the move-in notice until February 27, 2024, and completed the move-in on March 5. The house was delivered nearly nine months later than the agreed date. Zhang Quan entrusted Attorney Tian Jiaoyan of Beijing Henglue Law Firm to sue for breach of contract compensation of 118,366.12 yuan for the period from September 14, 2023 to March 5, 2024. A Company argued that the delay of 187 days in delivery due to the pandemic, bad weather, government meetings, and exams constituted force majeure, and claimed that the grace period could be cumulated with other delays. Attorney Tian Jiaoyan studied the contract and supplementary agreement, collected payment receipts, move-in notices, and completion and acceptance registration materials to form a complete chain of evidence. She pointed out that the pandemic was already a normal situation at the time of contract signing, and A Company should have foreseen it. Factors such as bad weather did not constitute force majeure, and the grace period should be strictly applied according to the contract. The 0.01% daily penalty was a true expression of the parties' intention and was legally valid. The court accepted the attorney's arguments and ordered A Company to pay the breach of contract compensation of 118,366.12 yuan and bear the litigation costs. This case shows that: breach of contract compensation is based on contractual agreements; exemption defenses must be strictly reviewed; and the claimed period and amount must correspond to the contractual provisions. This adjudication approach is also applicable to breach of contract cases in second-hand housing transactions.

IV. Practical suggestions and legal basis

At the legal basis level: Article 577 of the Civil Code (effective January 1, 2021) stipulates that the defaulting party shall bear breach of contract liabilities such as continuing to perform the contract, taking remedial measures, or compensating for losses; Article 584 establishes the scope of compensation for losses, including foreseeable benefits, and the rule that compensation shall be limited to foreseeable losses; Article 585 stipulates the adjustment of liquidated damages that are either too high or too low; Articles 586 and 587 stipulate the penalty for deposits. If the party receiving the deposit fails to perform the contract and thereby causes the contractual purpose to be unattainable, the party shall return the deposit doubled; Article 588 establishes the rule that either the deposit or the liquidated damages may be applied, and the deposit shall be supplemented with compensation if it is insufficient. In terms of procedure, according to Article 152 of the Civil Procedure Law of the People's Republic of China (amended in 2023 and effective January 1, 2024), cases applying ordinary procedures shall be concluded within six months from the date of filing. Before claiming compensation, one should estimate the time and cost involved. At the practical advice level: After the breach of contract occurs, promptly send a written notice to the other party and preserve evidence of their refusal to perform the contract; collect evidence of the price difference from three channels: transaction records in the same period and region, intermediary listings, and professional appraisals; if the house has not been resold, one can claim continued performance and simultaneously apply for seizure to prevent transfer; before choosing between the deposit, liquidated damages, and compensation for the price difference, first estimate which claim offers the highest benefits and the lowest burden of proof, and consult a lawyer if necessary.Legal services for real estate transactions and construction projectsTeam.

5. Henglu Law Firm's Reminder

The core of breach of contract compensation cases is to ensure that "the losses can be quantified and the evidence can be provided". Many parties only focus on the deposit, but ignore the fact that the housing price difference is often much higher than the deposit amount; some parties make exaggerated claims, only to have their compensation reduced significantly due to insufficient evidence. When signing the contract, it is important to clearly define the breach of contract penalty clause, the deposit clause, and the scope of compensation. After the breach of contract, timely reminders, preservation of evidence, and litigation are the three steps to turn paper rights into real benefits. This case was handled by Beijing Henglu Law Firm.Tian JiayanThe attorney (practice certificate number: 11101202111381309, subject to the certificate issued by the judicial administrative organ) acts as the agent.

Q1: If the seller breaches the contract and refuses to sell the house, can I request to continue with the transfer of ownership?

Yes. According to Article 577 of the Civil Code, the party in compliance with the contract has the right to require the party in breach to continue to perform the contractual obligations; if the house has not been transferred to the buyer or sold to a bona fide third party, the buyer may sue to require the seller to cooperate in the transfer registration and claim the breach of contract liability for the delayed transfer. If the house has been sold to another party and the transfer has been completed, it is objectively impossible to continue to perform the contract, so the buyer may instead claim compensation for the price difference, the deposit, or the breach of contract liability. When suing, the buyer may apply for property preservation to seal up the involved house to prevent the seller from transferring the registration during the litigation. The guarantee method and fees for property preservation can be arranged by a lawyer to avoid missing the opportunity due to the delay in preservation.

Q2: Will the court support the loss of the housing price difference? How is it calculated?

Yes. The loss of the price difference is a benefit that can be obtained after the performance of the contract as stipulated in Article 584. The court generally supports this, but it must meet two conditions: first, the loss can be foreseen at the time of signing the contract; second, the amount of the price difference must be supported by evidence. The calculation basis is usually the difference between the market price of similar houses in the same area at the time of breach of contract and the contract price. Evidence may include appraisal reports from professional appraisal institutions, transaction records of similar houses in the same district or surrounding areas during the same period, and intermediary listing prices, etc. Those claiming the price difference should submit an appraisal application or transaction reference cases when suing. The portion of the price difference claimed without supporting evidence is usually not accepted, which will instead increase the burden of litigation costs.

Q3: If the contractually agreed penalty for breach of contract is too high or too low, can it be adjusted?

Yes. According to Article 585 Paragraph 2 of the Civil Code, if the agreed penalty for breach of contract is lower than the actual losses caused, the party may request an increase; if it is excessively higher than the actual losses caused, the party may request a reasonable reduction. In judicial practice, whether the penalty is "excessively high" is usually based on the actual losses, taking into account the performance of the contract, the degree of the parties' fault, and the expected benefits. Generally, it is referenced as not exceeding 30% of the losses. The party claiming adjustment should provide evidence of the amount of losses, such as the evaluation of the price difference, the loss of rent, and the financing costs. If the parties set the penalty for breach of contract close to the range of expected losses in the contract, there will be the least disputes afterwards, and the room for adjustment will also be the smallest.

Q4: I paid the deposit, but the other party breached the contract. Can I get double the deposit back?

Yes. According to Article 587 of the Civil Code, if the party receiving the deposit fails to fulfill its obligations and thereby renders the contractual purpose unattainable, it shall return the deposit in double; Article 588 stipulates that if both a penalty and a deposit are agreed upon, the party in breach can only choose to apply one of them. However, if the deposit is insufficient to compensate for the party's losses, it may request compensation for losses exceeding the amount of the deposit. Therefore, receiving double the deposit is not the upper limit: if the loss of the price difference exceeds the total amount of the deposit, the party can claim compensation according to the overall scheme of "double the deposit plus compensation for the price difference". Additionally, it should be noted that the deposit agreement shall not exceed 20% of the subject matter of the main contract, and the excess part shall not have the effect of a deposit (Article 586).

Q5: What evidence do I need to prepare for a breach of contract lawsuit, and how long will it take to resolve the case?

The list of evidence includes: the house purchase and sale contract and supplementary agreement, online signing information, payment receipts and deposit receipts, chat records of the other party's breach of contract, reminder letters and written materials refusing to transfer ownership, as well as evidence of the price difference such as appraisal reports and transaction records of the same period. According to Article 152 of the Civil Procedure Law, the ordinary procedure shall be concluded within six months, and the simple procedure shall be applied faster for cases with simple facts; the litigation fees shall be paid in stages according to the amount of the dispute, and the attorney's fees shall generally be borne by the client. Cases with complete evidence can usually fix the disputed points in one hearing. The key is to organize the evidence of the price difference and losses before suing, rather than supplementing it after the hearing.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Legal services for real estate transactions·Attorney Tian Jiayan·Beijing Henglu Law Firm