Discussion On Liquidated Damages Clause In A Guarantee Contract Of A Guarantee Company

a liquidated damages clause is a basic clause provided by Contract Law to procure the full implementation of a contract, and its legislation purpose is also reflected by the adoption of a liquidated damages clause in a guarantee contract of a guarantee company. However, in legal practice, a liquidated damages clause in a guarantee contract is indeed a disputable challenge, especially the variance of the results of judicial judgments which to some extent weakens the authority and solemnity of the law due to the legal deficiency in this field. The legal deficiency directly affects the nature analysis and classified application of a liquidated damages clause in a guarantee contract, and even leads to double standards during its applications. As a result, the legal effect of a liquidated damages clause may be vague in legal practice, and in particular, it will inevitably cause jurisprudence disputes and disagreements in practice on the rights of recovery, subrogation and its restrictions after the guarantor has fulfilled the principal obligations. These ambiguities and disagreements are bound to directly have prejudice against the legitimate rights and interests of a guarantee company, which will weaken the authority of the law and affect the market stability. This should be noted by the legal world.How to determine the legal relations between the creditor, the debtor and the guarantor and how to distinguish their respective rights and obligations and legal liabilities in case a dispute arises? From the nature, effect, and performance basis of a liquidated damages clause, how to find the solutions to these problems? All these depend upon the existing legal basis. Although the regulations on the performance of a liquidated damages clause in a guarantee contract are insufficient and featured by ambiguity, they are still the basic starting point for us to research and solve problems.Based on the analysis of the nature, function and current operation of a guarantee company as a new subject of market in the current market economy and the difference of the cases, this article has analyzed the inherent function and the insufficiency of the existing laws, with the purpose of further setting up and perfecting the legal system for guarantee companies, and assuring the full efficiency of a liquidated damages clause in a guarantee contract. This will contribute to a sound legal environment for the healthy and steady development of the guarantee market, and is of vital importance for the perfecting of the socialist market economy system.