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Can I Claim Loss of Profit Against Chinese Suppliers?

As a business man, it is good if your trade partner is a honest and nice people. However, sometimes you may face dishonest guy and they breached the contract. This is when you need to claim your rights under the law. Recently, we received a lot of consultation regarding the losses in profit. Could you claim for lost profit damages when your counter party breached the contract under PRC law?



The concept of Lost profit damages under PRC law


Under PRC law, lost profit damage is called losses in acquirable interests. Article 113 of the Contract Law of the PRCis related, it provides that:“Where a party failed to perform or rendered non-conforming performance, thereby causing loss to the other party, the amount of damages payable shall be equivalent to the other party's loss resulting from the breach, including any benefit that may be accrued from performance of the contract, provided that the amount shall not exceed the likely loss resulting from the breach which was foreseen or should have been foreseen by the breaching party at the time of conclusion of the contract. ” In short, lost profits in China are an estimate of the total sum of the loss of profits that can be realized and acquired if the contract is fully performed.


When you can claim for lost profit damages in china


Firstly, the other party breached the contract. This is a precondition for you to claim losses in acquirable interests. Secondly, you suffered the profit losses. The two main elements to judge whether the lost profits exist are predictability and certainty. Predictability means the breaching party should have anticipated your loss in profits when entered into the contract. If the breaching party does not breach the contract, you should make the lost profits if you duly performed the contract. To judge whether the breaching party has foreseen your lost profits, the court usually judge based on the specific facts of the case, for example, the purpose of the contract, the behavior of the breaching party. For the content to foresee, the mainstream opinion is that the breaching party not only has to foresee the type of lost profit, also the degree of the loss. How to determine the lost profit is certain? In legal practice, there are two main opinions. One think that certainty only means the fact that the non-breaching party lost profits is certain, not including the amount of the loss is certain, the amount of the lost profits is a question for calculation. The other o