Signing a contract with a payment of 20,000 yuan, but terminating it requires a compensation of 150,000 yuan—unreasonable!
[2] Compiled from: Huaiyin District Court
The signing fee for the streamer was 20,000 yuan, but the contract termination requires the streamer to pay 150,000 yuan in compensation. Can the management company's lawsuit claim be supported?
Case review
On August 1, 2022, Star Company and Ms. Liu signed an "Artist Performance Economic Contract," stipulating that Star Company would act as Ms. Liu's exclusive global economic manager. Ms. Liu was required to stream live on the platform designated by the company, with a daily streaming duration of no less than 6 hours, a monthly streaming days of no less than 26 days, and a total monthly duration of no less than 156 hours. The contract was valid from August 1, 2022, to August 1, 2023. Star Company paid Ms. Liu a signing fee of 20,000 yuan, and later distributed income to Ms. Liu according to the profit-sharing method stipulated in the contract. The two parties also signed a "Live Streaming Equipment Loan Agreement," under which Star Company lent Ms. Liu a set of dedicated live streaming equipment valued at 6,300 yuan. The contract stipulated that if Ms. Liu failed to complete stable streaming for 12 months due to personal reasons, she must refund the signing fee and management fee. Ms. Liu started streaming in August 2022 but stopped on her own in November 2022 without returning the streaming equipment to the company. Therefore, Star Company filed a lawsuit in court, requesting the termination of the "Artist Performance Economic Contract" signed by both parties, demanding that Ms. Liu refund the signing fee of 20,000 yuan, compensate for the economic loss of the dedicated live streaming equipment amounting to 15,000 yuan, and pay liquidated damages of 150,000 yuan.
Ms. Liu did not appear in court for the lawsuit or defense, nor did she submit any evidence.
[1] Court Opinion
The focus of the dispute in this case is whether the signing fee, equipment loss compensation, and liquidated damages requested by Star Company should be supported.
The court found that the "Artist Performance Economic Contract" and "Live Streaming Equipment Loan Agreement" signed by the plaintiff and the defendant were both genuine expressions of the parties' intentions and did not violate legal provisions, and the court confirmed them. After signing the contract, the plaintiff paid the defendant a signing fee of 20,000 yuan. Because the defendant's live streaming did not meet the contract requirements, the plaintiff requested the termination of the "Artist Performance Economic Contract" and the return of the 20,000 yuan, which was in line with the contract and should be supported. The plaintiff requested the defendant to compensate for equipment economic losses of 15,000 yuan, of which 6,300 yuan was stipulated in the contract and supported, while the remaining part lacked evidence from the plaintiff and was not supported. The plaintiff requested the defendant to pay liquidated damages of 150,000 yuan. The contract stipulated that if the defendant stopped broadcasting or proposed termination without just cause, they should compensate the plaintiff for the loss of expected income from training and developing the artist or pay liquidated damages of 500,000 yuan. Based on the plaintiff's evidence, the defendant's unauthorized cessation of broadcasting constituted a breach, and liquidated damages should be paid. Considering the defendant's live streaming duration and requirements, the defendant should have been aware of the contract terms, and the consequences of breach were clearly defined. The plaintiff adjusted the liquidated damages to 150,000 yuan, which was relatively high compared to their investment, so the court supported 100,000 yuan as appropriate, and the remaining part was not supported. Defendant Ms. Liu, after being legally summoned, failed to appear in court without just cause, which was deemed as waiving her rights to present evidence and cross-examine in the first instance.
Ultimately, the court legally ruled to terminate the "Artist Performance Economic Contract" signed by both parties, requiring Defendant Ms. Liu to return the signing fee of 20,000 yuan and live streaming equipment payment of 6,300 yuan to Star Company, and pay liquidated damages of 100,000 yuan. After the judgment, neither party appealed, and the judgment has now taken effect.
Civil Code of the People's Republic of China
Article 577
If a party fails to perform its contractual obligations or performs them in a manner inconsistent with the agreement, it shall bear liability for breach of contract, such as continuing performance, 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 based on the breach, or agree on a method for calculating the amount of compensation for losses caused by the breach. If the agreed liquidated damages are lower than the losses incurred, the people's court or arbitration institution may increase them upon the party's request; if the agreed liquidated damages are excessively higher than the losses incurred, the people's court or arbitration institution may appropriately reduce them upon the party's request. If the parties agree on liquidated damages for delayed performance, the breaching party shall still perform the debt after paying the liquidated damages.
[1] The author's perspective
From this case, it can be seen that the court does not accept Star Company's requests indiscriminately but analyzes them item by item. For example, the live streaming equipment explicitly stipulated in the contract and the initial signing fee of 20,000 yuan were both supported by the court. However, the court deemed the 150,000 yuan liquidated damages should be appropriately reduced. According to relevant legal provisions and judicial practice, if the agreed liquidated damages exceed 30% of the losses incurred, it is generally considered "excessively higher than the losses." In this case, Ms. Liu failed to carry out relevant work as per the contract time, constituting a breach. Considering various factors, the court's reduction of the liquidated damages to 100,000 yuan was both legal and reasonable.
