Article 40 see also Agreed Obligations Validity
Standard clauses shall become invalid if they fall under any of the circumstances set forth in Articles 52 and 53 of this Law or if the party that provides the standard clauses exempts itself from the liability, imposes heavier liability on the other party, or precludes the other party from its main rights.
If the quality fails to meet the agreed requirements, liability for breach of contract shall be borne in accordance with the agreement between the parties. If the liability for breach of contract is not stipulated or is not clearly stipulated, nor can it be determined pursuant to the provisions of Article 61 of this Law, the party suffering the loss may, with reference to the nature of the targeted matter and the degree of the loss, choose in a reasonable manner to demand that the other party bear the liability for breach of contract in such form as repair, replacement, redoing, return of the targeted matter, discount in payment or remuneration.
Where either party fails to perform its obligations under the contract or does not perform its obligations as contracted, and losses are still caused to the other party after the performance of obligations or the adoption of remedial measures, the party in fault shall compensate for the losses.
If either party fails to perform its obligations under the contract or does not perform its obligations as contracted and thus causes losses to the other party, the amount of compensation for the loss shall be equivalent to the loss actually caused by the breach of contract and shall include the profit obtainable after the performance of the contract, but shall not exceed the sum of the loss that might be caused by a breach of contract and has been anticipated or ought to be anticipated by the breaching party in the making of the contract.
A business operator who practices fraud in providing commodities or services to consumers shall undertake to compensate for the damage in accordance with the provisions of the Law of the People's Republic of China on the Protection of Consumers' Rights and Interests.
The parties may stipulate that in case of breach of contract by either party a certain amount of penalty shall be paid to the other party according to the seriousness of the breach, and may also stipulate the method for calculating the sum of compensation for losses caused by the breach of contract.
If the stipulated penalty for breach of contract is lower than the loss caused by the breach, the party concerned may apply to a people's court or an arbitration institution for an increase. If the stipulated penalty for breach of contract is excessively higher than the loss caused by the breach, the party concerned may apply to a people's court or an arbitration institution for an appropriate reduction.
If the parties agree upon a penalty for the breach of contract by a delayed fulfillment, the breaching party shall, after paying the penalty for breach of contract, discharge the debts notwithstanding.
The parties may, in accordance with the Guarantee Law of the People's Republic of China, agree that one party pays a deposit to the other party as a guarantee of the creditor's rights. After the debtor has met its liabilities, the deposit shall be calculated as part of the price or be refunded. If the party paying the deposit fails to meet its liabilities as contracted, it shall not be entitled to the refund of the deposit. If the party receiving the deposit fails to meet its liabilities as contracted, it shall doubly refund the deposit.
In the event that a penalty for breach of contract and a deposit are both stipulated by the parties, when either party breaches the contract, the other party may choose to apply either the clause on penalty for breach of contract or the clause on deposit.
After either party breaches the contract, the other party shall take appropriate measures to prevent the increase of the loss; the party that fails to take appropriate preventive measures and thus aggravates the loss may not claim compensation for the increased part of the loss.
The reasonable expenses incurred by the other party in preventing the aggravation of the loss shall be borne by the breaching party.