How to differentiate liquidated damages, deposits, deposits, earnest money, and commissions

Liquidated Damages

Liquidated damages are a certain amount of currency agreed by the parties or directly prescribed by law. When the defaulting party fails to perform the contract, it will be paid to the compliant party. According to relevant laws and regulations, liquidated damages can be divided into statutory liquidated damages and agreed liquidated damages. Statutory liquidated damages refer to the liquidated damages ratio or scope specified in some regulations. The agreed liquidated damages refer to the liquidated damages ratio or amount voluntarily agreed upon the signing of the contract between the parties. In legal theory, liquidated damages are divided into compensatory liquidated damages and punitive liquidated damages based on the legal consequences of liquidated damages. The schools that support compensatory liquidated damages hold that liquidated damages are mainly used to compensate the contractor for losses. Scholars who hold punitive opinions believe that liquidated damages are mainly used to ensure the performance of the contract, and a punishment agreed in advance for the defaulting party.

However, from the perspective of China's judicial practice, both of them exist, but they are mainly compensatory compensation. As stipulated in article 114th of the Contract Law, "The parties may agree that a party shall pay a certain amount of liquidated damages to the other party based on the breach of contract, or agree on the calculation method of the amount of compensation for losses arising from the breach. If the liquidated damages agreed upon are less than the losses caused, the parties may request the people's court or arbitration institution to increase the liquidated damages; if the liquidated damages agreed upon are excessively higher than the losses caused, the parties may request the people's courts or arbitration institutions to appropriately reduce the number. If the Parties delay in performing the agreed liquidated damages, the defaulting party shall also perform the debts after paying the liquidated damages ."

Therefore, when signing a contract, we must make a clear agreement on liquidated damages. Especially in the active and increasing real estate market, it is better for buyers to agree higher liquidated damages. In this way, it is not only a constraint on the family, but also the maximum compensation for the infringement of your rights and interests.

Deposit

A deposit refers to the amount of money paid by one party to the other party in advance to guarantee the performance of the contract. Article 115th of the Contract Law stipulates that "the parties may, in accordance with the [Guarantee Law of the People's Republic of China], pay a deposit to the other party as a guarantee for creditor's rights. After the debtor fulfills the debt, the deposit shall be paid or withdrawn. If the party paying the deposit fails to fulfill the agreed debt, it has no right to request the return of the deposit. If the party receiving the deposit fails to fulfill the agreed debt, the deposit shall be returned in double ." This is what we usually call a deposit penalty. Article 116th stipulates that "if both the parties agree on liquidated damages and the deposit, the other Party may choose to apply the liquidated damages or deposit terms when one party defaults .". Article 90th of the Guarantee Law of the People's Republic of China stipulates that "deposits shall be agreed in writing. The parties shall agree on the time limit for the delivery of the deposit in the deposit contract. The deposit contract takes effect from the date on which the deposit is actually delivered ."; Article 91st stipulates that "the deposit amount shall be agreed by the parties, but shall not exceed 20% of the deposit in the main contract ". Article 4 of the Interpretation of the Supreme People's Court on Several Issues concerning applicable laws in the case of disputes over the sale of commercial housing contracts

The seller accepts a deposit from the buyer through subscription, order, reservation, and other means as a guarantee for the establishment of a commercial housing sales contract. If the seller fails to conclude a commercial housing sales contract due to one of the parties, it should be handled in accordance with the provisions of the law on deposits. if the seller fails to conclude the commercial housing sales contract due to reasons that cannot be attributed to both parties, the Seller shall return the deposit to the buyer."

Therefore, from the legal point of view, the deposit has a dual nature. First, it can be used as a guarantee for the performance of the contract. Second, it can prove the establishment of the contract. As a double-edged sword, deposit is also punitive. That is, if one party fails to perform the contract, it has no right to request the refund of the deposit. If the other party accepts the deposit and fails to perform the contract, it must double the refund of the deposit. As a legal form, the deposit has specific requirements:

1. Formal requirements must be signed in writing;

2. The amount is limited, and the total deposit cannot exceed 20% of the contract's mark;

In addition, you can only choose one of them in the settlement and liquidated damages.

Deposit

The difference between deposits and deposits is only one word, but there is a world of difference in the legal nature. Deposits are not a standard concept and are only a kind of Prepayment in law. It is a part of the prepayment and a payment method of the client. It is not guaranteed. The performance of the Contract shall only be used as a charge, and the non-performance can only be refunded. Article 118th of the Interpretation of the Supreme People's Court on the application of the [Guarantee Law of the People's Republic of China] stipulates that "the parties shall deliver the deposit, guarantee, deposit, contract, deposit or deposit, however, if there is no agreement on the nature of the deposit, the People's Court will not support the right to make a deposit ". It can be seen that if the Parties specify "deposit" in the contract and do not agree on the deposit nature, the deposit penalty cannot be applied. Therefore, buyers must be careful and careful when signing, otherwise they will regret it.

Cheng Yijin

Sincerity, that is, intention gold, is a claim sent from the Hong Kong and Taiwan regions more than a decade ago. This is often reflected in the contract signed between the intermediary and the buyer and the seller. In fact, the law does not mean any earnest money, the main reason is that the honest credit system in our trading market is still not perfect, and the transaction entity will often violate the principle of honest credit for their respective interests, thus compromising the interests of one party. Sometimes, for the benefit of an intermediary company, whether the transaction is successful or not, it will be confiscated in the name of the buyer or the seller's sincerity or breach of contract. In fact, this practice is based on the law.

An intermediary company generally acts as an intermediary or an agent of the buyer or the seller in housing sales. As an intermediary between the buyer and the seller, a third party is independent of the buyer and the seller. According to article 426th of the Contract Law, "if an intermediary facilitates the establishment of the contract, the principal shall pay the remuneration as agreed. If there is no agreement on the remuneration of the intermediary or the agreement is not clear, and the provisions in accordance with Article 61st of this law still cannot be determined, the compensation shall be reasonably determined based on the labor services of the intermediary. If a contract is established because the intermediary provides media services for contract formation, the parties to the contract shall equally pay the remuneration of the intermediary. If the intermediary facilitates the establishment of the contract, the expenses for the intermediary activities will be borne by the intermediary .". Article 427th stipulates that "if an intermediary fails to establish a contract, it shall not be requested to pay compensation. However, it may require the principal to pay the necessary expenses for conducting intermediary activities ." It can be seen that, at this time, the intermediary can only ask the buyer and the seller or the party (in case of a Special Agreement) to pay compensation when the contract between the buyer and the seller is established. As the latter, the intermediary is the agent of one of the buyers and sellers. According to article 2 of the General Principles of Civil Law of the People's Republic of China, "the delegated agent shall exercise the agency right on behalf of the entrusted agent ,......". Article 2 stipulates that "If an agent fails to perform its duties and causes damage to the agent, it shall bear civil liability .". Article 405th of the Contract Law stipulates that "if the trustee completes the entrusted affairs, the principal shall pay the remuneration to him. If the entrusted contract is terminated or the entrusted affairs cannot be completed due to the reason which cannot be attributed to the trustee, the principal shall pay the trustee the corresponding remuneration. Otherwise agreed by the parties, in accordance with the provisions .". Article 406th stipulates that "in a paid entrusted contract, if the trustee's fault causes losses to the principal, the principal may request compensation for the losses. In a free commission contract, if the trustee causes losses to the principal due to intentional or gross negligence, the principal may request compensation for the losses. If the trustee exceeds the authority to cause losses to the principal, the trustee shall compensate for the losses ." From the General Principles of the Civil Law and the provisions of the Contract Law, we can see that in this legal relationship, the intermediary, as an agent of one Party, should engage in agency activities in accordance with the provisions of the contract and get compensation.

Therefore, no matter whether it is an intermediary or an agent of both buyers and sellers, there is no earnest money. Buyers must view the specific terms of the contract and then sign the Agreement, especially in the form of earnest money.

Commission

Commission refers to the labor remuneration paid by a broker (real estate agent) after providing a contracting opportunity or serving as a contractor for the principal (buyer or seller) to complete the intermediary services of the principal. Therefore, the Commission is the labor income of the intermediary in the housing sales activity. After the broker completes the brokerage activity, it has the right to collect the Commission according to the contract. The Commission standards shall be subject to the agreement of both parties or by reference to commercial practices, and shall not violate national laws, regulations and policies.