Can 'liquidated damages' and' delay interest 'be combined?
2025-09-15
In the process of dispute resolution, mediation has become the priority choice of many parties due to its advantages of efficiency, convenience and performance. However, when one party assumes the agreed liability for breach of contract based on the mediation agreement, can the other party still claim statutory interest for delayed performance? Recently, the Yangpu District People's Court in Shanghai concluded a case of execution objection, providing reference for the resolution of such disputes. After paying the penalty for breach of contract, a dispute arose between Xiao Su (pseudonym) and Xiao Huang (pseudonym) over the sale of the house. Under the mediation of the judge, the two parties reached an agreement: Xiao Su would pay Xiao Huang the purchase price of 2.19 million yuan in installments. If the full payment was not made on time, Xiao Su would need to pay an additional penalty of 150000 yuan. Based on this, Yangpu District Court issued a civil mediation agreement. After the mediation agreement came into effect, Xiaosu failed to make timely payment as agreed in the agreement. Xiaohuang applied to the court for enforcement, so Xiaosu paid the full amount of 2.19 million yuan for the purchase of the house and 150000 yuan for breach of contract confirmed in the mediation agreement to the court. However, Xiaohuang once again applied to the court, claiming that Xiaosu had delayed payment and demanding that she pay interest on the debt during the period of delayed performance. Should this' double payment 'raise an objection to Xiao Su, arguing that he has already paid the agreed penalty of 150000 yuan according to the mediation agreement, which is already an' increased responsibility 'for overdue payment behavior. According to relevant judicial interpretations, after assuming the civil liability stipulated in the mediation agreement, one should no longer bear the liability for delayed performance as stipulated in the Civil Procedure Law of the People's Republic of China, otherwise it constitutes double punishment. However, Xiaohuang insists that the penalty for breach of contract is a contractual liability, while the interest for delayed performance is a statutory liability, and the nature of the two is different. The focus of the dispute in this case is whether the statutory interest on delayed performance still needs to be paid after paying the liquidated damages stipulated in the mediation agreement? After trial, the Yangpu District Court found that Xiaosu had already borne the 150000 yuan penalty agreed in the mediation agreement for overdue payment of the purchase price, and there was no need to pay the debt interest during the delayed performance period for this part of the purchase price in accordance with the law. The "Provisions of the Supreme People's Court on Several Issues Concerning Civil Mediation Work of the People's Court" clearly states that "if a party who fails to perform a mediation agreement assumes the civil liability determined in the mediation agreement in accordance with the provisions of the preceding paragraph, and the other party demands that it assume the liability for delayed performance as stipulated in Article 253 of the Civil Procedure Law, the people's court shall not support it." Here, "civil liability" refers to the aggravated or punitive liability specifically agreed upon by the parties in a non immediate performance mediation agreement for the non performance of the agreement. The legislative purpose of the delayed performance liability stipulated in the Civil Procedure Law of the People's Republic of China is also to punish the behavior of failing to fulfill the obligations determined by legal documents on time and compensate creditors for the losses suffered due to delayed performance. The above two types of responsibilities are in a competitive relationship, and the parties can only choose to exercise one of them. The nature of the penalty for overdue payment stipulated in the mediation agreement is already an "increased liability" set for Xiao Su's failure to fulfill the mediation agreement on time. If Xiao Su is required to bear both the liquidated damages stipulated in the mediation agreement and the statutory debt interest or liquidated damages during the period of delayed performance, it will make the party fulfilling the obligation repeatedly bear "aggravated liability" or "punitive liability", which violates the principles of fairness and good faith. In the end, the Yangpu District Court made a ruling not to support Xiao Huang's execution request. The responsibility agreement in the mediation agreement should be clear. The presiding judge of the case said that in the process of resolving civil disputes, mediation, with its efficient and flexible characteristics, has become the preferred way for many parties. However, the clarity of the responsibility agreement in the mediation agreement is related to its effectiveness and performance. Clarifying the applicable rules for breach of contract liability and statutory delay in performance liability in mediation agreements can provide important guidance for parties when reaching mediation agreements. When the mediation agreement clearly stipulates the specific breach of contract liability (such as liquidated damages) for non performance of the agreement, and the obligor has actually borne the liability, the creditor has no right to demand that the obligor bear the statutory delayed performance interest corresponding to the same breach. The two have overlapping functions and unique applicability. If the mediation agreement does not specify a specific breach of contract liability for the delayed performance of a certain obligation, the creditor may, in accordance with the law, demand that the obligor bear the interest or penalty for delayed performance as stipulated in the Civil Procedure Law of the People's Republic of China. This is considered a statutory supplement to the mediation agreement that does not specify liability for breach of contract. For creditors, when reaching a mediation agreement, they should fully consider the performance risks that the obligor may have, and clearly and specifically stipulate the breach of contract liability in different situations (such as the calculation standards of liquidated damages at different stages) in the agreement, in order to avoid the dilemma of insufficient relief after the other party delays performance. The design of this breach of contract liability should fully cover possible losses and punishment needs. At the same time, creditors should also rationally protect their rights within the legal framework. Mediation aims to efficiently resolve conflicts and promote harmony through reconciliation. Obligators should abide by good faith, strictly fulfill their obligations in accordance with the mediation agreement, and avoid bearing additional responsibilities and credit losses due to their own breach of contract. The responsibility agreement in the mediation agreement is the "fixed star" for resolving disputes. Clear responsibility design can not only provide creditors with clear relief paths, but also enable debtors to have stable expectations of the consequences of performance, reducing subsequent disputes from the source. In the mediation process, all parties should use the law as a yardstick and good faith as a basis, accurately agree on their rights, obligations, and responsibilities, and make mediation a powerful tool for resolving disputes and achieving the settlement of cases. (New Society)
Edit:Rina Responsible editor:Lily
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