[Direct answer]In the Beijing area, it is possible to claim compensation, but the claim is for damages rather than liquidated damages: the establishment of liability for breach of contract does not require the agreement on liquidated damages. If the other party breaches the contract, you can claim compensation for actual losses and foreseeable profits, limited to the losses that could be foreseen at the time of contract conclusion; if there is no agreement on liquidated damages, the losses of overdue payments are generally calculated at the interest rate announced by the National Interbank Funding Center for the loan market. Some courts refer to the overdue penalty interest rate to support the increase; but pay attention to the reverse rule - if the contract does not stipulate liquidated damages, you cannot claim liquidated damages from the other party and can only claim compensation for damages.

1. Problem background and typical scenarios

"Is there no penalty clause in the contract, so it's impossible to hold the other party accountable?" — This is one of the most common misunderstandings in commercial disputes. Delivery delays, payment defaults, and disputes over acceptance—many companies mistakenly believe that the absence of a penalty clause means there's no remedy. They refrain from asserting their rights during negotiations and simply give up on litigation. In reality, a penalty clause is just one form of contractual liability. The legal remedy of statutory compensation is always available, but the calculation method and burden of proof may differ.

II. Key points of contention

First, the scope of compensation for losses and the rule of predictability. Second, the calculation method of interest on overdue payments. Third, the relationship between the choice of penalty clauses and compensation for losses. Fourth, the assumption of legal fees and other costs of protecting rights.

III. Professional analysis by Henglue Lawyers

This case is handled by Beijing Henglu Law FirmXiong BinrongLawyer (Practice Certificate No.: 11101202211410897, subject to the certificate issued by the judicial administrative authority): Agent. **First Level**: The basic framework of statutory compensation: Article 577 of the Civil Code of the People's Republic of China – Where a party fails to perform its contractual obligations or performs them in violation of the contract, it shall bear contractual liabilities such as continued performance, remedial measures, or compensation for losses; Article 584 – The amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the profits that could have been obtained after the contract is performed, but shall not exceed the losses that the breaching party could have foreseen or should have foreseen at the time of contract conclusion. **Breakdown**: - What to compensate for – direct losses (interest on paid amounts, remedial costs, and losses from work stoppages) plus expected profits (loss of profits); - Legal boundaries – the "foreseeability rule": only losses that could have been foreseen at the time of contract conclusion are compensable. This also suggests that including "potential business disruptions and profit losses due to breach of contract" in the contract at the time of signing formalizes the scope of foreseeable losses. **Second Level**: Algorithm for overdue payments: - If no contractual penalties or interest are specified, the mainstream approach is to calculate the loss of use of funds based on the Loan Prime Rate (LPR); - In sales contract disputes, the Supreme People's Court's Interpretation on the Application of Law in Cases Involving Sales Contract Disputes stipulates that the seller may claim damages for overdue payments – in practice, most courts support this based on the LPR, while some cases refer to the overdue penalty interest rate (LPR + surcharge) as a discretionary standard; - Claiming based on the LPR during litigation and providing sufficient evidence is a prudent litigation strategy. **Third Level**: Choice between contractual penalties and compensation: - Where contractual penalties are specified, the claim for penalties takes precedence, but if the amount is too low (lower than actual losses), the claim may be increased; if it is too high (exceeding actual losses), it may be reduced (Article 585); - Without contractual penalties, only compensation for losses applies – in this case, the breaching party's "defense of contractual penalties" is ineffective. In a second-instance case of an online service contract we handled, the opposing company counterclaimed for over 30,000 yuan in penalties, but the court found no penalty clause in the contract and dismissed the counterclaim, demonstrating that claims for penalties must have a contractual basis. Conversely, the aggrieved party's claim for compensation does not require a contractual basis, only evidence of losses. **Fourth Level**: Practical points for proving losses: - Direct losses are easier to calculate (payment receipts, interest calculation tables); - Expected profits are harder to prove – requiring evidence of profit predictability (past operating data, industry profit margins, contract certainty); - Preserve evidence of chain losses caused by breach (downstream claims, additional procurement price differences, work stoppage losses); - Calculate losses in a "documented, logical, and reproducible" manner to provide a basis for court adjudication.On the fifth floor, attorney fees and litigation costs: Whether the attorney fees can be borne by the breaching party depends on the contract provisions or arbitration rules. If the contract stipulates that the breaching party shall bear the costs of realizing the creditor's rights, the attorney fees, preservation fees, and arbitration fees can be claimed together. In an arbitration case of a commissioned creation contract handled by our firm, the other party defaulted on the contract payment of more than 580,000 yuan after accepting the works. The arbitration tribunal ruled that the full amount should be paid and compensated for all the attorney fees of the client. The clause in the contract that "the breaching party shall bear the litigation costs" proved its worth at the critical moment. For those without such a clause, the attorney fees are generally borne by all parties themselves, which is also the most worthwhile clause to add during the contract drafting stage.

IV. Practical Suggestions and Legal Basis

The first step is to list the losses separately: direct losses and potential benefits, and provide evidence for each item. The second step is to calculate interest: if there is no agreement, claim according to the LPR rate, and ensure that any increase in the rate is supported by evidence. The third step is to select the right of claim: if there is a penalty clause, proceed with the penalty; if not, proceed with compensation for losses, and do not mix the two. The fourth step is to add clauses: include penalty clauses and legal defense costs in the next contract. Main legal basis: Articles 577, 584, and 585 of the Civil Code of the People's Republic of China, and relevant provisions of the Interpretation of the Supreme People's Court on the Application of Law in the Trials of Disputes over Sales Contracts; specific application shall be subject to the currently effective regulations.

5. Henglue Law Firm's Reminder

Three key points for breach of contract claims: 1. Even without a penalty clause, damages can still be claimed—covering actual losses and anticipated profits, subject to reasonable limits. 2. Late payments are subject to interest calculated based on the LPR (Loan Prime Rate), and additional interest may be claimed with strong evidence. 3. Include a clause in the contract requiring the breaching party to cover legal defense costs, ensuring reimbursement for attorney fees. For matters involving breach of contract claims and contract disputes, please contact us for assistance.Business and contract disputes in enterprisesThe service provides a comprehensive solution, which involves the combination of debt enforcement and property preservationCreditor's rights and debts, and enforcement casesFor reference, you can check the clauses related to commissioned works and intellectual property contractsIntellectual property protection and corporate lawFor reference, you can refer to the sections related to the drafting and review of contract textsSpecialised legal services板块。

VI. Frequently Asked Questions

Q1: If there's no agreed-upon penalty clause, how should the interest on overdue payments be calculated?

Interest is generally calculated based on the loan market quoted interest rate. For some cases, the interest rate is adjusted upward according to the overdue penalty interest rate. When suing, the claimant shall make a claim based on the interest rate that can be supported by evidence.

Q2: How to provide evidence for the loss of anticipated profits?

Provide evidence such as past operating data, profit margins in the same industry, and the certainty of contract performance. The calculation of losses should be supported by invoices, logical reasoning, and verifiable data.

Q3: If a breach penalty has been agreed upon, can I still claim compensation for losses?

If the penalty is not sufficient to compensate for the actual losses, the party may request an increase; generally, the two requests should not be made repeatedly and concurrently.

Q4: What should I do if the other party says the losses were exacerbated by my own actions?

The party in breach of contract has the obligation to mitigate the loss. The part of the loss caused by the failure to take reasonable measures shall not be claimed, but the reasonable expenses of the mitigation measures can be claimed.

Q5: Can I make the other party bear the attorney's fees?

If the contract stipulates that the breaching party shall bear the cost of safeguarding rights, the claimant may assert this right. For arbitration cases, the arbitration rules shall also be taken into account. If no such stipulation exists, the parties shall generally bear the cost themselves.

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

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public 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.