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How to determine that the agreed penalty for overdue payment is too high in cases of sales contract disputes where actual losses cannot be proven-- Answers to Several Difficult Issues Concerning Foreign-related Commercial Trials (Part Two) (7)

by the Intermediate Court of Ningbo

· Laws and Regulations,Lawyer,Transnational Commerce

Answer: In sales contract disputes, thesubject matter of overdue payment is the obligation to pay money, which is the same as in private lending disputes. Therefore, the determination of the penalty ratio can refer to Article 6 of the "Opinions of the Supreme Court on the Trial of Loan Cases by the Court", The interest rate of private lending can be appropriately higher than the interest rate of banks, and the court may determine it based on the actual situation in the local area, but the maximum limit shall not exceed 4 times the interest rate of similar loans by banks (including the principal interest rate). If the limit is exceeded, the interest beyond the limit shall not be protected. Therefore, if the buyer and seller agree that the penalty for overdue payment exceeds 4 times the bank's loan interest rate for the same period, the court should determine that the agreed penalty is too high and adjust it according to the request of the parties.

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