Generally speaking, the upper limit of contract penalty is not more than 30% of the actual loss, which is legal. But if it is too high or too low, you can ask the court to reduce or increase it. The parties may agree that when one party breaches the contract, it shall pay a certain amount of liquidated damages to the other party according to the situation of breach of contract, and may also agree on the calculation method of the amount of compensation for breach of contract. Article 577 of the Civil Code: If a party fails to perform its contractual obligations or fails to meet the contract obligations, it shall bear the liabilities for breach of contract such as continuing to perform, taking remedial measures or compensating for losses.

Legal objectivity:

"Provisions of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Trial of Private Lending Cases" Article 29 Both lenders and borrowers have agreed on overdue interest rates, liquidated damages or other expenses. The lender can choose to claim overdue interest, liquidated damages or other expenses, or both, but the people's court will not support the part that exceeds 4 times the quoted interest rate of the one-year loan market when the contract is established. Article 585 of the Civil Code of People's Republic of China (PRC) stipulates that when one party breaches the contract, it shall pay a certain amount of liquidated damages to the other party according to the situation of breach of contract, and may also stipulate the calculation method of damages for breach of contract. If the agreed liquidated damages are lower than the losses caused, the people's court or arbitration institution may increase the liquidated damages at the request of the parties; If the agreed liquidated damages are excessively higher than the losses caused, the people's court or arbitration institution may appropriately reduce them at the request of the parties. If the parties concerned pay liquidated damages for delayed performance, the breaching party shall also perform the debt after paying the liquidated damages.