Study on the Calculation Rules and their Application of Damages for Breach of Contract under Chinese Laws

Under the background of the market economy, the types of contracts are becoming more and more abundant, and the discussion about the application of the calculation rules of damages for breach of contract in different contract types is also increasing. The statistical analysis of China's judicial practice shows that the number of cases involving the claim for damages for breach of contract significantly differs under the influence of contract types, geographical distribution, and trial procedures. Implementing the IGPC of the China Civil Code represents the step towards the formulaic and standardized stage of China's calculation rules for breach of contract damages. Compared with the diversified research perspectives of overseas literature, China started relatively late in studying the formulaic rules for calculating damages for breach of contract. The existing literature mainly focuses on foundational theories and less on calculation methods and corresponding special rules. In China, the calculation of damages for breach of contract is based on the foundational principle of full compensation, and the rules of foreseeability, mitigation, certainty, etc, limit the damages. However, some rules need to be interpreted specially when applied in long-term contracts. According to the circumstances of the cases, the existing calculation rules deal with the calculation of expectation or reliance interests. The calculation rules usually consist of four elements: loss of value, other losses, avoided expenses, and losses avoided. All the rules could be interpreted into three types of formulas: general formula, special formula, and miscellaneous formula.