The contract is valid if the penalty exceeds 30%.
 Is legal; Article 585 of the Civil Code stipulates that the parties may agree that when one party breaches the contract, it shall pay a certain amount of liquidated damages to the other party in accordance with the circumstances of the breach, and may also agree on the calculation method of the amount of compensation for losses arising from the breach. If the agreed liquidated damages are lower than the losses caused, the people's court or arbitration institution may increase them at the request of the parties; If the agreed liquidated damages are too high than the losses caused, the people's court or arbitration institution may, at the request of the parties, appropriately reduce them. If the parties agree on liquidated damages for delay in performance, the defaulting party shall perform its obligations after paying the liquidated damages. If the liquidated damages agreed upon by the parties exceed 30% of the losses caused, they can generally be deemed as being excessively higher than the losses caused.
 Legal basis
 Article 585 [Liquidated Damages] of the Civil Code of the People's Republic of China [Liquidated Damages] 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 circumstances of the breach, or they may agree on the calculation method of the amount of compensation for losses arising from the breach.
 If the agreed liquidated damages are lower than the losses caused, the people's court or arbitration institution may increase them at the request of the parties; If the agreed liquidated damages are too high than the losses caused, the people's court or arbitration institution may, at the request of the parties, appropriately reduce them.
 If the parties agree on liquidated damages for delay in performance, the defaulting party shall perform its obligations after paying the liquidated damages.