Legal basis: Civil Code of People's Republic of China (PRC).
Article 577 Where a party fails to perform its contractual obligations or fails to perform its contractual obligations in conformity with the contract, it shall be liable for breach of contract such as continuing to perform, taking remedial measures or compensating for losses.
Article 585 The parties may agree that one party shall pay a certain amount of liquidated damages to the other party for breach of contract, or may agree on the calculation method of the amount of compensation for losses caused by 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.