People's Court Case Database: If the breaching party fails to mention it in the first instance and submits a request for a reduction of liquidated damages in the second instance, the court of second instance should still hear whether to adjust the liquidated damages?
Transferred from: Civil and Commercial Trial Information
Source: China Judgments Network, Civil Law Reference
Reference case: Chen v. Liu, a contract dispute case
2024-07-2-483-001 / Civil / Contract Dispute / Beijing No. 3 Intermediate People's Court / 2016.12.28 / (2016) Jing 03 Min Zhong No. 13939 / Second Instance
Summary of the trial
If the breaching party raises that the liquidated damages are too high in the second instance and requests a reduction of the liquidated damages, the court of second instance shall hear whether to adjust the liquidated damages, and shall not be deemed to have waived its right to request the adjustment of liquidated damages simply because the breaching party did not reply or appear in court in the first instance, and the court of second instance shall conduct a trial and make a judgment by comprehensively considering factors such as the standard of liquidated damages agreed in the contract, the degree of fault of the parties, the expected benefits, the principle of fairness, and the principle of good faith. The breaching party's dishonest litigation conduct may be handled in accordance with the provisions of the Civil Procedure Law and relevant judicial interpretations.
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Read the main points
Where the party breaching the contract claims in the first instance that it does not constitute a breach of contract, but does not raise a defense that the liquidated damages are too high, the court shall make an interpretation in accordance with law. If the court of first instance does not explain but orders the defendant to bear liquidated damages in accordance with the contract, the court of second instance may directly interpret and change the judgment according to the specific circumstances of the case.
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21. Where a party has made it clear in the first instance that it has not requested an adjustment of the standard of liquidated damages, but submits an application for adjustment in the second instance, whether it should be reviewed
Where one of the parties claims to pay liquidated damages on the grounds that the other party has breached the contract, and the other party makes a defense of exemption from liability on the grounds that the contract is not established, the contract has not taken effect, the contract is invalid or does not constitute a breach of contract, etc., but does not claim to adjust the liquidated damages that are too high, the people's court shall explain whether the party needs to claim the adjustment of liquidated damages if the court does not support the defense of exemption. In the first-instance trial, the court explained that if the breaching party of the construction project contract did not submit a request for adjustment of liquidated damages, but claimed the adjustment of liquidated damages in the second-instance trial, it shall not be examined, unless there is new evidence to prove that the liquidated damages are too high.
point of view
Source: The Research Office of the Supreme People's Court, et al., Understanding and Application of the Judicial Interpretation of the General Principles of the Civil Code of the Supreme People's Court, published by the People's Court Press
Based on the opinions of all parties, and in the consideration of convenient, efficient, and substantive dispute resolution, paragraph 2 of this article provides that if the defendant fails to appear in court to participate in the litigation during the first-instance trial procedure for objective reasons, the second-instance court may make a judgment to appropriately reduce the amount of liquidated damages in accordance with law. The reason why it is limited to "due to objective reasons" is to prevent the defendant from maliciously not participating in the litigation. In addition, considering that the request for adjustment of liquidated damages may affect the determination of basic facts, the purpose of this article is to reserve room for circumstances that may need to be remanded for retrial, which is consistent with the spirit of paragraph 1 of this article. In the investigation, there are also opinions that the people's court of first or second instance may review whether the liquidated damages are too high and directly adjust the defendant's failure to appear in court. The main reason is that such situations are so common that it would be unfair to the defaulting party not to adjust. In the end, we did not adopt this opinion because, according to Article 585, paragraph 2 of the Civil Code, the premise for adjusting liquidated damages is "at the request of the parties". Where the parties do not request, the people's court should not directly make adjustments.
It should be noted here that, although paragraph 2 of this article also follows the line of thought in paragraph 1 of this article, allowing the court of second instance to directly change the judgment and adjust the liquidated damages in the second instance at the request of the parties, with the aim of reducing the litigation burden of the parties, it is necessary to achieve a one-time settlement of the dispute. However, from the perspective of maintaining procedural fairness, it is necessary for the people's court to give corresponding explanations to both parties, fully listen to the opinions of the other party, fully respect the parties' rights to present evidence, cross-examine evidence, and debate, and avoid causing substantial damage to their procedural rights on the basis of maintaining procedural fairness.
Author: Han Yaobin
Source: Financial Leasing Judicial Practice and Case Handling Guidelines
Where the breaching party fails to respond or appear in court during the first-instance trial, and submits a request for adjustment of liquidated damages in the second-instance trial, it shall consider the system and the principle of good faith in a timely manner based on comprehensive evidence. If the parties fail to submit a request for adjustment of liquidated damages and provide evidence in the first instance due to objective reasons, if they can do so in the second instance, the court of second instance shall hear the request. However, if it affects the determination of the basic facts of the case, it is appropriate to remand for new trial from the perspective of protecting the interests of the parties at the trial level. Where a party refuses to appear in court without a legitimate reason in the first-instance trial, it is in fact a waiver of its procedural rights in the first-instance trial. Where they submit a request for adjustment of liquidated damages in the second-instance trial, violating the principle of good faith and the system of timely submission of evidence, and constituting a disruption of the normal order of litigation and a surprise attack on the opposing party's evidence, the second-instance court may not review it. However, if it affects the determination of the basic facts of the case, it is appropriate to proceed from the perspective of seeking truth from facts, taking into account the fairness and justice of the procedure, and remand for new trial.
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