В статье рассматривается институт заранее оцененных убытков в законодательстве зарубежных стран. Заранее оцененные убытки призваны разумно и справедливо согласовать интересы сторон и не должны рассматриваться в качестве ответственности правонарушителя. Заранее оцененные убытки отличаются от штрафных убытков, то есть штрафных санкций. В суде соглашение о заранее оцененных убытках может быть реализовано при наличии следующих условий:
– стороны подписали контракт, при нарушении которого потенциальные убытки труднодоказуемы;
– потенциальные убытки являются компенсацией, но не имеют характера штрафа.
Таким образом, заранее согласованные убытки не препятствуют потерпевшей ущерб стороне добиваться компенсации дополнительных убытков, то есть взыскания штрафных санкций, предусмотренных контрактом.
Оговорка о заранее оцененных убытках в контракте означает только то, что заранее определен размер убытка, но не сторона, которая за него отвечает.
Значительное внимание уделяется автором зарубежной практике. Автор отмечает преимущества заблаговременного определения размера убытков. Автор приходит к заключению об отсутствии в украинском законодательстве правового института заранее согласованных убытков.
Foreign economic activity is a very risky sphere of operational activity of huge enterprises. Thus, harmonized cooperation on the part of all its participants will lead to successful completion of projects and receipt of profit for company as well.
However, taking into account the possible risks, which parties can encounter, it is important to predict and evaluate any eventual losses, caused by intentional or accidental behavior of the parties. In such situations lawyers usually use the definition of “guilty party”, but it is obviously known that in some cases it is extremely difficult to prove the fault, which could cause never-finished debates, realized in future disputes between parties. Thus, parties to a contract use liquidated damages where actual damages, though real, are difficult or impossible to prove.
The aim of this article is to analyze the legislation of foreign countries, which managed to create the appropriate mechanism of satisfaction of parties’ demands in cases, mutually agreed in the relevant document.
Subject matter
In many foreign countries, contracts that involve the exchange of money or the promise of performance have a liquidated damages clause. The purpose of this stipulation is to establish a predetermined amount that must be paid if a party fails to perform as promised.
For example, liquidated damages clauses are commonly used in real estate contracts. A builder who does not meet a schedule of project execution, may have to compensate this delay. Liquidated damages are an amount, estimated at equal the extent of injury that may occur, if the contract is breached. These damages are determined when a contract is drawn up and serve as protection for both parties that have concluded the contract, whether they are a buyer and a seller, customer and exécuter, an employer and an employee or other similar parties.
Analyzing the foreign practice, it should be noted that liquidated damages clauses possess several contractual advantages:
1. The parties can establish some predictability involving costs, so that parties can balance the cost of anticipated performance against the cost of a breach. In this way liquidated damages serve as a source of limited insurance for both parties.
2. Each party has the opportunity to settle the dispute in an amount that is mutually agreeable, rather than leaving that decision up to the courts and adding the costs of time and legal fees.
All parties agree that the amount of liquidated damages is fair and reasonable and would not act as a penalty to the breaching party.
Risks and their elimination
Liquidated damages are not imposed, if the defendant can show that the liquidated damages clause was included as punishment for failing to keep contract terms, instead of covering improvable damages, i.e. punitive damages. Let’s do the research!
The court system will enforce a liquidated damage clause if it meets two conditions:
a) When both parties sign a contract the potential damages are uncertain and difficult to prove and
b) The damages have to be a compensation for injuries and not referred to as a penalty, namely the court systems will not enforce a penalty clause in a contract (England, Germany, etc). The liquidated damages are reasonably proportionate to the expected probable loss from a breach. Otherwise, where the liquidated damages are disproportionately high to the anticipated loss, the provision will be deemed to be an unenforceable penalty.
Summing up, there are three criteria distinguish valid liquidated damages provisions from invalid penalty provisions:
1. The parties must intent to provide for damages rather than for penalty,
2. The injury must be “uncertain” or “difficult to quantify” and
3. The stipulated amount must be a “reasonable pre-estimate of probable losses”.
It is worth mentioning that liquidated damages do not preclude the injured party from seeking additional damages as provided within the contract.
Enforce the law
Along the same lines, the inclusion of a liquidated damages clause may be considered as a form of insurance from the breaching party to the innocent party. This would occur when one party places a high subjective value on performance of the contract and the other party is best able to provide the insurance necessary to compensate for harm to the subjective value.
Release of funds to the seller or executer in the event of a buyer’s or customer default is not automatic. It requires mutual consent and a separate signed release. If the deposit is increased, both parties are required to sign a separate liquidated damages form to cover the increased deposit.
Remember too that the liquidated damage provision determines the amount of damages the seller will receive, but is does not mean that release of the funds will be automatic. The escrow holder is a neutral third party and can only act with the consent of both parties to / the escrow. That is why I stated above that by signing the liquidated damages clause the parties “in theory” ensure certainty and avoid the fight. A dispute over which party breached the RPA-CA may still result a legal dispute to determine who breached. The liquidated damages provision only determines the amount of the damages. It is the rest of the RPA-CA’s provisions that determine which party is in breach.
Foreign experience
American experience
The American approach to liquidated damages can be illustrated by both the Uniform Commercial Code and the Restatement 2d Contracts: Restatement 2d Contracts Para. 356: 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 in proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.
Common law countries
Most common law countries such as England, Australia, Ireland and Canada have similar rules with regard to liquidated damages, and do not allow for liquidated damages that are used as a penalty. One exception to the rule is India, where the Contracts Act makes no distinction between liquidated damages and penalties and allows for contractual damages for failure to perform even if the intention is to penalize.
Civil law countries or European experience
In civil law countries, the attitude toward contractual penalties is quite different from the common law approach. The Napoleonic Code, upon which most civil codes are based, allowed for penalties to encourage performance of contractual obligations.
The Council of Europe issued a Resolution on Penalty Clauses in 1971 with the aim of recommending a uniform application of penalty clauses for the member states to use. The resolution allows penalty clauses, but the penalty amount may be reduced by the courts if they are manifestly excessive or if part of the main contractual obligation of the contract has been performed.
It is difficult to find any uniform application of liquidated damages/penalty clauses in case law of the various European countries. In most countries, the courts never evaluate the intent behind the penalty. Whether it is enforceable depends solely on whether it is excessive in its amount. Some countries have, however, taken a more restrictive approach, and also examine the relationship between the penalty/liquidated damages and the actual loss, suffered by the plaintiff. This approach is similar to the common law approach to liquidated damages.
Worldwide
The exception is in the UNICITRAL uniform rules relating to liquidated damages and penalty clauses; this problem has been solved by simply referring to both as “contract clauses for an agreed sum due upon failure of performance. According to the UNICITRAL rules, an agreement between parties of a contract to pay a certain sum in the event of non-performance is generally allowed, whether as a penalty or compensation. However, the amount can be reduced by the courts if it is substantially disproportionate to the actual loss.
Advantages of liquidated damages
Taking into account the aforementioned, advantages of liquidated damages are the following:
- Proof of damages is often an exceedingly complex and time-consuming process which would be removed from issues at trial. This would save time and money for the courts as well as parties in both pre-trial preparation and courtroom time. In general, the trial would be more efficient because the number of issues before the court would be reduced.
- The theory of compensation damages instead of punitive damages is applied.
- The general rule is that a court cannot increase or decrease the amount of liquidated damages. However, it should be noted that could be restricted by law. For example, for residential purchases of one to four units, California law sets the maximum amount of liquidated damages at 31% of the purchase price.
4. The determination in advance of the amount of compensation for damages (liquidated damages) shall not prejudice an obligor’s right to demand performance or rescission.
Conclusion
And to conclude, it is important to take into account and written in the document, concluded between counterparts from different countries, the liquidated damages clause when the document is governed by the law of European or American countries. If you decide to use for regulation of documents a law of Ukraine, it should include the penalty clauses provided by the Civil Code and Commercial Code of Ukraine. Currently not included in the legislation, the concept of liquidated damages is a possible way to ensure the counterpart to accept to conceive the included penalties as liquidated damages rather than punishment. I think that the modification of Ukrainian legislation with regard to inclusion of liquidated damages provision is the next step in legislation development and reducing the workload of courts.
It is DIFFICULT to FIND any UNIFORM APPLICATION of LIQUIDATED DAMAGES/ penalty clauses in CASE LAW of the EUROPEAN COUNTRIES
LIQUIDATED DAMAGES AND PENALTY CLAUSES IN FOREIGN COUNTRIES
COUNTRY RULE OF LAW
EUROPEAN APPROACH TO LIQUIDATED DAMAGES:
France Articles 1226 to 1233 of La Code Civil regulates “la clause pénale” (penalty clause), and Article 1152 regulates “dommages-lnterest” (liquidated damages). The former may be reduced by a judge if part of the main contract obligation has been performed and if it is “manifestly excessive”. Liquidated damages may also be adjusted If “obviously excessive or ridiculously low”.
Italy Both concepts, “clausola pénale” (penalty clause) and “liquidazione convenzionale del danno” (liquidated damages), exist in doctrine, but not in the Civil Code. Penalties are generally enforceable but can be mitigated if “manifestly excessive” or if part of the main contract obligation has been performed.
Spain Article 1154 of the Codigo Civil regulates penalty clauses (Clausula Penal), which can be reduced by a judge if part of the main contract obligation has been performed. There Is no provision regarding mitigation of the penalty because of excessiveness, which makes Spain one of the few countries that has not amended its Civil Code to allow a reduction in the amount of the penalty.
Gemany There is a distinction between liquidated damages(Schadenspauschale) and contractual penalties(Vertragsstrafe) in the German Civil Code, and both are allowed In accordance with Article 340 and 341 of the BGB. The difference between them Is that the latter can be mitigated if “disproportionate or excessively high”.
Netherlands/
Switzerland Both of these countries have rules similar to Germany, except that a penalty may be mitigated in the Netherlands If “manifestly excessive” and In Switzerland if “excessive”.
Belgium Penalty clauses are permitted, but the amount can be mitigated if it “obviously exceeds the actual damage” and if part of the main contract obligation has been performed.
Scandinavia The laws of Denmark, Finland, Norway and Sweden allow either the voiding or reformation of a penalty clause that is deemed to be “unreasonable”. Swedish law specifically provides for an evaluation of the relative bargaining power of the parties In making this determination. The Swedish Commercial Code Section 36 (2) provides that “particular consideration” shall be given to protecting the party “in a subordinate position in the contractual relationship”.
OTHER CIVIL LAW COUNTRIES OUTSIDE EUROPE HAVE ADOPTED A SIMILAR APPROACH, SUCH AS:
China Penalty clauses in contracts are permitted, according to Article 114 of the Chinese Contract Law. The amount can be increased or reduced by the People’s Court or in arbitration if “excessively higher than loss”.
Russia The New Civil Code from 1994 allows for both liquidated damages and contractual penalties in contracts. Both can be reduced by the court if obviously disproportionate to the actual loss.
Such changes came into force from 2013, namely: from 1 Jury 2013 the changes in Civil Code of Russian Federation came into force and supplemented by Article 1064 of the norm of the following content: “law or agreement can set up the obligation for the party that caused the damage to pay an injured person compensation above the reimburse of damage. The Law can set up the obligation of a person who did not cause the damage to pay to injured persons compensation above the reimbursement of damage”. In this connection, legislators introduced amendments in the Town Planning Code of the Russian Federation which came into force from 1 July 2013. Thus, Article 60 has the following content: “In case of causing damage to a person or property of person, property of citizen, property of legal entity because of destroy, damage of building, construction or part of building or construction, violation of requirements to the provision of safe exploitation of building, construction, the owner of such building, construction (excluding case, provided by the article 2 of this article), if he does not prove that the indicated destruction, violation were caused because of the intention of an injured person, action of third parties or extraordinary or unavoidable under such conditions circumstances of force majeure reimburse the damage in accordance with civil legislation and pays compensation above the limits of reimburse of damage to:
1) relatives of injured party (parents, children, adoptive parents, adoptees), husband / wife in case of death injured party — in the amount of three million rubles;
2) injured party in case of cause of hard damage to this / her health — in the amount of RUB 2 million rubles;
3) injured party in case of cause of average value damage to his / her health — in the amount of RUB one million.
The deals about non-typical losses are actions of subjects of civil law, directed to the settlement, change or finish of civil laws and obligations, which lead to the transformation of lawful finish or limitation of right of subjects of civil turnover in monetary equivalent, which comply with their sum of compensation.
The most important thing in this case is the compensation amount for refusal from the ownership right or limitation of right (by agreement) of the subject of civil turnover.
In such a case, the case is about payment by the subject of civil law of an monetary amount which is the first
obligation of subject of civil law on payment of compensation amount in account of reduction of any material
or other welfare of a person and is not an additional encumbrance for him. Therefore, it is a special form of
monetary debt, because the payment is the essence of a primary obligation of the subject.
Therefore, it is necessary to draw the conclusion: ”
1. Liquidated damages can be:
— set up in law,
— agreed by parties in the agreement.
2. Regulated in the agreement and sizes of losses should not be considered as penalties, because they are just losses. Because it is not possible to apply to them norms about the penalty, namely Article 333 of Civil Code of Russian Federation about a decrease in the size of the penalty.
3. Agreement about penalties in many cases releases the party from a difficult process of proof of all conditions for the occurrence of loss.
EXAMPLES OF A MORE ANGLO-AMERICAN APPROACH:
Denmark The Supreme Court struck out penalty clause because of a disproportionate penalty in relation to the contract price. The penalty in question was four to six times the contract price. The court also found that the plaintiff had not proved that he had actually suffered the corresponding loss.
Belgium The Court established that the amount in a penalty clause can be declared unenforceable if the penalty amount “obviously exceeds actual damage”. However, the clause would not be voided, but the amount would be reduced.
EXAMPLES OF A MORE TRADITIONAL CIVIL LAW APPROACH:
Spain A penalty clause was found to be unenforceable, since there was no connection to the main contractual obligation. The court did not discuss whether the amount was excessive or not.
Italy The Court found that a penalty clause can be reduced if manifestly excessive, or if the main contractual obligation has been partially performed. Mitigation may be ordered by the judge even if neither of the parties has asked for it.
Portugal The Supreme Court upheld a penalty clause in a car lease contract, since the penalty was in proportion to the risk of a breach of the contract and loss of the value of the car.
Автор: Katerynа A. NASTECHKO
Источник: The Ukrainian Journal of Business Law. – December. – 2013. – P. 31 – 34.