FINES FOR BREACHES & FORCIBLE PAYMENT OF DAMAGES IN COMMERCIAL CONTRACT
The parties to a commercial contract may agree or choose a regulation on commercial remedies to protect legitimate interests, prevent and limit potential damage. Including commercial remedies, Penalties for “Fines for breaches” and “Forcible payment of damages” are the two most commercial remedies, according to which the difference between Penalty for Fines for breaches and Forcible payment of damages in the commercial contract is as follows:
| Criteria | Fines for breaches | Forcible payment of damages |
| According to | Article 266, 300, 301 Commercial Law 2005, Article 146 The construction law 2014 | Article 302, 303 Commercial Law 2005 |
| Concept | Fine for breach means a remedy whereby the aggrieved party requests the breaching party to pay an amount of fine for its breach of a contract, if so agreed in the contract, except for cases of liability exemption specified | Damages means a remedy whereby the breaching party pays compensation for the loss caused by a contract-breaching act to the aggrieved party. |
| Based on application | – There is an agreement between the parties in the contract;
– There are Fines for breaches as agreed in the contract; – It is not necessary have material loss |
Shall arise upon existence of all of the following elements:
– Breach of the contract; – Material loss; – Act of breaching the contract is the direct cause of the loss. |
| Fine level | The fine level for a breach of a contractual obligation or the aggregate fine level for more than one breach shall be agreed upon in the contract by the parties :
– Must not exceed 8% of the value of the breached contractual obligation portion; – Must not exceed 12% of the value of the violated contract for works using state funds; – Must not exceed ten times the assessment service charge for traders providing assessment services issue assessment certificates showing incorrect results caused by their unintentional faults |
The value of damages:
– The value of the material and direct loss suffered by the aggrieved party due to the breach of the breaching party; and – The direct profit which the aggrieved party would have earned if such breach had not been committed. |
| Relationship between Fines for breaches and Forcible payment of damages | -Where the parties do not agree upon fines for breaches, the aggrieved party shall only be entitled to claim damages, unless otherwise provided by Law.
– Where the parties agree upon fines for breaches, the aggrieved party shall be entitled to apply both remedies of fines and damages, unless otherwise provided by Law.
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