Compensation

Article 40
Article 40
Article 40
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.
Article 111
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.
Article 112
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.
Article 113
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.
Article 114
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.
Article 115
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.
Article 116
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.
Article 119
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.
Article 6.111 (ex art. 2.117) - Change of Circumstances 344
Article 6.111 (ex art. 2.117) - Change of Circumstances 344
Article 6.111 (ex art. 2.117) - Change of Circumstances 344
(1) A party is bound to fulfil its obligations even if performance has become more onerous, whether because the cost of performance has increased or because the value of q the performance it receives has diminished. 345
(2) If, however, performance of the contract becomes excessively onerous because of a change of circumstances, the parties are bound to enter into negotiations with a view to adapting the contract or terminating it, provided that: 346
(a) the change of circumstances occurred after the time of conclusion of the contract, 347
(b) the possibility of a change of circumstances was not one which could reasonably have been taken into account at the time of conclusion of the contract, and 348
(c) the risk of the change of circumstances is not one which, according to the contract, the party affected should be required to bear. 349
(3) If the parties fail to reach agreement within a reasonable period, the court may: 350
(a) terminate the contract at a date and on terms to be determined by the court; or 351
(b) adapt the contract in order to distribute between the parties in a just and quitable manner the losses and gains resulting from the change of circumstances. 352 In either case, the court may award damages for the loss suffered through a party refusing to negotiate or breaking off negotiations contrary to good faith and fair dealing. 353
Article 8.108 (ex art 3.108) - Excuse Due to an Impediment 436
Article 8.108 (ex art 3.108) - Excuse Due to an Impediment 436
Article 8.108 (ex art 3.108) - Excuse Due to an Impediment 436
(1) A party's non-performance is excused if it proves that it is due to an impediment beyond its control and that it could not reasonably have been expected to take the impediment into account at the time of the conclusion of the contract, or to have avoided or overcome the impediment or its consequences. 437
(2) Where the impediment is only temporary the excuse provided by this article has effect for the period during which the impediment exists. However, if the delay amounts to a fundamental non-performance, the obligee may treat it as such. 438
(3) The non-performing party must ensure that notice of the impediment and of its effect on its ability to perform is received by the other party within a reasonable time after the non-performing party knew or ought to have known of these circumstances. The other party is entitled to damages for any loss resulting from the non-receipt of such notice. 439
Section 4 - Price Reduction 488
Article 9.401 (ex art 4.401) - Right to Reduce Price 489
(1) A party who accepts a tender of performance not conforming to the contract may reduce the price. This reduction shall be proportionate to the decrease in the value of the performance at the time this was tendered compared to the value which a conforming tender would have had at that time. 490
(2) party who is entitled to reduce the price under the preceding paragraph and who has already paid a sum exceeding the reduced price may recover the excess from the other party. 491
(3) A party who reduces the price cannot also recover damages for reduction in the value of the performance but remains entitled to damages for any further loss it has suffered so far as these are recoverable under Section 5 of this chapter. 492. 
Section 5 - Damages and Interest 493
Article 9.501 (ex art. 4.501) - Right to Damages 494
(1) The aggrieved party is entitled to damages for loss caused by the other party's non-performance which is not excused under Article 8.108. 495
(2) The loss for which damages are recoverable includes: 496
(a) non-pecuniary loss; and 497
(b) future loss which is reasonably likely to occur. 498
Article 9.502 (ex art 4.502) - General Measure of Damages 499
The general measure of damages is such sum as will put the aggrieved party as nearly as possible into the position in which it would have been if the contract had been duly performed. Such damages cover the loss which the aggrieved party has suffered and the gain of which it has been deprived. 500
Article 9.503 (ex art. 4.503) - Foreseeability 501
The non-performing party is liable only for loss which it foresaw or could reasonably have foreseen at the time of conclusion of the contract as a likely result of its non- performance, unless the non-performance was intentional or grossly negligent. 502 
Article 9.504 - Loss Attributable to Aggrieved Party (new; previously part of 4.504) 503
The non-performing party is not liable for loss suffered by the aggrieved party to the extent that the aggrieved party contributed to the non-performance or its effects. 504
Article 9.505 - Reduction of loss (previously part of 4.504) 505
(1) The non-performing party is not liable for loss suffered by the aggrieved party to the extent that the aggrieved party could have reduced the loss by taking reasonable steps. 506
(2) The aggrieved party is entitled to recover any expenses Reasonably incurred in attempting to reduce the loss. 507
Article 9.506 (ex art. 4.505) - Substitute Transaction 508
Where the aggrieved party has terminated the contract and has made a substitute transaction within a reasonable time and in a reasonable manner, it may recover the difference between the contract price and the price of the substitute transaction as well as damages for any further loss so far as these are recoverable under this Section. 509
Article 9.507 (ex art. 4.506) - Current Price 510
Where the aggrieved party has terminated the contract and has not made a substitute transaction but there is a current price for the performance contracted for, it may recover the difference between the contract price and the price current at the time the contract is terminated as well as damages for any further loss so far as these are recoverable under this Section. 511
Article 9.508 (ex art. 4.507) - Delay in Payment of Money 512
(1) If payment of a sum of money is delayed, the aggrieved party is entitled to interest on that sum from the time when payment is due to the time of payment at the average commercial bank short-term lending rate to prime borrowers prevailing for the contractual currency of payment at the place where payment is due. 513 
(2) The aggrieved party may in addition recover damages for any further loss so far as these are recoverable under this Section. 514
Article 9.509 (ex art. 4.508) - Agreed Payment for Non-performance 515
(1) Where the contract provides that a party who fails to perform is to pay a specified sum to the aggrieved party for such non-performance, the aggrieved party shall be awarded that sum irrespective of its actual loss. 516
(2) However, despite any agreement to the contrary the specified sum may be reduced to a reasonable amount where it is grossly excessive in relation to the loss resulting from the non-performance and the other circumstances. 517
Article 9.510 (ex art. 4.509) - Currency by which Damages to be Measured 518 Damages are to be measured by the currency which most appropriately reflects the aggrieved party's loss. 519
§ 236 Claims for Damages for Total and for Partial Breach
(1) A claim for damages for total breach is one for damages based on all of the injured party's remaining rights to performance.
(2) A claim for damages for partial breach is one for damages based on only part of the injured party's remaining rights to performance.
§ 243 Effect of a Breach by Non-Performance As Giving Rise to a Claim for Damages for Total Breach
(1) With respect to performances to be exchanged under an exchange of promises, a breach by non-performance gives rise to a claim for damages for total breach only if it discharges the injured party's remaining duties to render such performance, other than a duty to render an agreed equivalent under § 240.
(2) Except as stated in Subsection (3), a breach by non-performance accompanied or followed by a repudiation gives rise to a claim for damages for total breach.
(3) Where at the time of the breach the only remaining duties of performance are those of the party in breach and are for the payment of money in installments not related to one another, his breach by non-performance as to less than the whole, whether or not accompanied or followed by a repudiation, does not give rise to a claim for damages for total breach.
(4) In any case other than those stated in the preceding subsections, a breach by non- performance gives rise to a claim for total breach only if it so substantially impairs the value of the contract to the injured party at the time of the breach that it is just in the circumstances to allow him to recover damages based on all his remaining rights to performance.
§ 244 Effect of Subsequent Events on Duty to Pay Damages
A party's duty to pay damages for total breach by non-performance is discharged if it appears after the breach that there would have been a total failure by the injured party to perform his return promise.
Topic 2 - Enforcement by Award of Damages
§ 346 Availability of Damages
(1) The injured party has a right to damages for any breach by a party against whom the contract is enforceable unless the claim for damages has been suspended or discharged.
(2) If the breach caused no loss or if the amount of the loss is not proved under the rules stated in this Chapter, a small sum fixed without regard to the amount of loss will be awarded as nominal damages.
§ 347 Measure of Damages in General
Subject to the limitations stated in §§ 350-53, the injured party has a right to damages based on his expectation interest as measured by
(a) the loss in the value to him of the other party's performance caused by its failure or deficiency, plus
(b) any other loss, including incidental or consequential loss, caused by the breach, less
(c) any cost or other loss that he has avoided by not having to perform.
§ 348 Alternatives to Loss in Value of Performance
(1) If a breach delays the use of property and the loss in value to the injured party is not proved with reasonable certainty, he may recover damages based on the rental value of the property or on interest on the value of the property.
(2) If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover damages based on
(a) the diminution in the market price of the property caused by the breach, or
(b) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him.
(3) If a breach is of a promise conditioned on a fortuitous event and it is uncertain whether the event would have occurred had there been no breach, the injured party may recover damages based on the value of the conditional right at the time of breach.
§ 349 Damages Based on Reliance Interest
As an alternative to the measure of damages stated in § 347, the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.
§ 350 Avoidability as a Limitation on Damages
(1) Except as stated in Subsection (2), damages are not recoverable for loss that the injured party could have avoided without undue risk, burden or humiliation.
(2) The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss.
§ 351 Unforeseeability and Related Limitations on Damages
(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.
(2) Loss may be foreseeable as a probable result of a breach because it follows from the breach
(a) in the ordinary course of events, or
(b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know.
(3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation.
§ 352 Uncertainty as a Limitation on Damages
Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty.
§ 353 Loss Due to Emotional Disturbance
Recovery for emotional disturbance will be excluded unless the breach also caused bodily harm or the contract or the breach is of such a kind that serious emotional disturbance was a particularly likely result.
§ 354 Interest as Damages
(1) If the breach consists of a failure to pay a definite sum in money or to render a performance with fixed or ascertainable monetary value, interest is recoverable from the time for performance on the amount due less all deductions to which the party in breach is entitled.
(2) In any other case, such interest may be allowed as justice requires on the amount that would have been just compensation had it been paid when performance was due.
§ 355 Punitive Damages
Punitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable.
§ 356 Liquidated Damages and Penalties
§ 356 Liquidated Damages and Penalties
(1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.
(2) A term in a bond providing for an amount of money as a penalty for non-occurrence of the condition of the bond is unenforceable on grounds of public policy to the extent that the amount exceeds the loss caused by such non-occurrence.
Article 15. Compensating for losses.
1. The person whose right has been violated can demand that the losses inflicted on him be compensated for, unless the law or contract stipulates a smaller recovery.
2. Losses imply the expenses that the person whose right had been violated incurred or will have to incur in order to restore the violated right, the loss or damage of his property (actual damage), as well as lost revenues this person could have received under normal conditions of civil circulation, had his right not been violated (lost profit). If the right-breaker made gains in consequence of this, the victim has the right to demand that, besides other losses, the lost profit be recovered in the amount no less than such gains.
Article 393. The Debtor's Obligation to Recompense the Losses
1. The debtor shall be obliged to recompense to the creditor the losses, caused to him by the non-discharge or by an improper discharge of the obligations.
2. The losses shall be defined in conformity with the rules, stipulated by Article 15 of the present Code.
3. Unless otherwise stipulated by the law, by the other legal acts or by the agreement, when defining the losses, the prices shall be taken into account, which existed in the place, where the obligation should have been discharged, on the date of the debtor's voluntary satisfaction of the creditor's claims, and if the claim has not been voluntarily satisfied - on the date of its presentation. Proceeding from the circumstances, the court may satisfy the claim for the compensation of the losses, taking into account the prices, which existed on the day of its adopting the decision.
4. When defining the lost profit, the measures, taken by the creditor to derive it, and the preparations, made for the same purpose, shall be considered.
Article 394. The Losses and the Forfeit
1. If for the non-discharge or an improper discharge of the obligation the forfeit has been ruled, the losses shall be recompensed in the part, which has not been covered by the forfeit. The law or the agreement may stipulate the cases: when only the forfeit, but not the losses shall be exacted; when the losses may be exacted in full above the forfeit; when, according to the creditor's choice, either the forfeit or the losses may be exacted.
2. In the cases, when a limited responsibility for the non-discharge or an improper discharge of the obligation has been established (Article 400), the losses, liable to compensation in the part, not covered by the forfeit, or above it, or instead of it, may be exacted up to the limit, fixed by such a restriction.
Article 395. Responsibility for the Non-Discharge of the Pecuniary Obligation
1. For the use of the other person's money as a result of its illegal retention, of the avoidance of its return or of another kind of delay in its payment, or as a result of its ungroundless receipt or saving at the expense of the other person, the interest on the total amount of these means shall be due. The interest rate shall be defined by the discount rate of the bank interest, existing by the date of the discharge of the pecuniary obligation or of the corresponding part thereof at the place of the creditor's residence, and if the creditor is a legal entity - at the place of its location. If the debt is exacted through the court, the court may satisfy the creditor's claim, proceeding from the discount rate of the bank interest on the date of filing the claim or on the date of its adopting the decision. These rules shall be applied, unless the other interest rate has been fixed by the law or by the agreement.
2. If the losses, caused to the creditor by an illegal use of his money, exceed the amount of the interest, due to him on the ground of Item 1 of the present Article, he shall have the right to claim that the debtor recompense him the losses in the part, exceeding this amount.
3. The interest for the use of the other person's means shall be exacted by the date of payment of the amount of these means to the creditor, unless the law, the other legal acts or the contract have fixed a shorter term for the calculation of the interest.
Article 396. Responsibility and the Discharge of Obligations in Kind
1. The payment of the forfeit and the compensation of the losses in case of an improper discharge of the obligation shall not absolve the debtor from the discharge of the obligations in kind, unless otherwise stipulated by the law or by the contract.
2. The compensation of the losses in case of the non-discharge of the obligation and the payment of the forfeit for its non-discharge shall absolve the debtor from the discharge of the obligation in kind, unless otherwise stipulated by the law or by the contract.
3. The creditor's refusal to accept the discharge, which as a consequence of the delay has lost all interest for him (Item 2 of Article 405), and also the payment of the forfeit, imposed by way of compensation (Article 409), shall absolve the debtor from the discharge of the obligation in kind.
Article 397. Discharge of the Obligation at the Debtor's Expense
In case of the non-discharge by the debtor of the obligation to manufacture and transfer the thing into the ownership, into the economic or into the operation management, or into the use of the creditor, or to perform for him a certain job, or to render him a service, the creditor shall have the right, within a reasonable term and for a reasonable pay, to commission the third persons with the performance of the obligation, or to perform it through his own effort, unless otherwise following from the law, the other legal acts or the contract, or from the substance of the obligation, and to claim that the debtor recompense the necessary expenses and the other losses he has borne.
Article 1064. General Grounds for Liability for Damage
1. The injury inflicted on the personality or property of an individual, and also the damage done to the property of a legal entity shall be subject to full compensation by the person who inflicted the damage. The obligation to redress the injury may be imposed by the law on the person who is not the inflictor of injury. The law or the contract may institute the obligation of the inflictor of injury to repay to the victims compensation over and above the compensation of damage.