Form Of Contract Research

The research of formal contract mainly involves three fundamental issues: firstly, the reason why laws would establish the compulsory norms for the form of certain contracts; secondly, among various kinds of contract forms, which shall be selected to be the method adopted by the norms? Thirdly, how to judge the validity of the contract if it lacks the legal form? However, the objective orientation of the compulsory form is the core of these three issues. When the legislator decide whether certain legal act is subject to compulsory form requirement, he should consider what goal it wants to achieve and whether the legal form could exercise this function. When the legislator decides which form this legal act should take, he would pay attention to function which various forms have respectively. When the legislator judges the legal effect at the time of the lack of legal form, he should assess the goal of the compulsory form, and what kind of legal effect is appropriate to express the "dissatisfaction" of the legislator with the frustration of this goal.This dissertation carries out research surrounding the said fundamental issues of formal contract. The article consists of four chapters: first, the foundations of contract form in Roman law and its modern development; second, the current situation of formal contract and the difficult position; third, the correction of form defect: the doctrine of correction by performance; fourth, the limited application of the form defect and its breakthrough.Chapter One discusses the foundations of contract form in Roman law and its modern development. In this chapter, the article briefly outlines the concept of contract form and the history of its system, analyzes how the nature of contract form shifts from the legal act itself in the classic Roman law to factors outside consensus which only affect the validity of contract.In the early stage of Roman law, the formal act, such as nexum, mancipium and cessio in iure, is one way of acquiring ownership; the Law of the Twelve Tables incorporated it into the section of "ownership and possession". In the stage of classic law, when the concept of contractus was separated from the concept of property "transfer", and when obligationum was shifted from material personal binding force to abstract and conceptual binding force, creditor should perform certain ceremony so as to maintain that legal binding force; the binding force of contract could only arise by the act which has certain form. As typical formal contract, stipulatio and contractus lilteris indicate the rigid formalisitic feature of the Roman law. With regard re contrahitur and contractus consensu, they are only the exception to the formalism because of numerus clausus of contractual types and its limitation of the effect. In the late stage of classic law when the stipulation totally lost the typical oral form and became the pure agreement which was concluded based on the intention of reaching stipulation between the people present, the strict formalism actually broke down. With the development of the informal contract and pactum, the basis of all the contractual obligation changed which shifted from the certain method or ceremony to the censensu between the parties. To this point, the nature of the form has changes, and separated from act, which is only "additional essential element" to the validity of that act.In the Canon law of middle ages broadened the scope of consensual contract, and it believed that the promise was an issue of consciousness which did not require special form: the wording and speeches were the agreement, and the promise was the basis of the agreement and the origin of the contract validity. Every promise, regardless of its form, is binding: pacta sunt servanda. Postglossator developed the theory of consensus, "pure consensus constitutes the obligation" has become the uniform concept of agreement which works for the establishment of new contract system and eventually get rid of the legal form binding force. The new doctrinesdeveloped by jurists of Canon law and Roman law have eventually played the coronach for the contract formalism.In modern law, as the core content of the autonomy of private law, freedom of contract emphasized the root of the binding force of the contract is the intention or will of both parties. Under the guidance of the principle of freedom of contract, the contract law of many countries has done away the limit of formalism, and adopted the consensualisme, under which the contract is established by the concurrency of the manifestation of will. The legal effect of the contract directly originates from the free will of the parties; the specific formal requirement is only exception.The principle of freedom of contract form has been widely accepted by contract laws of many countries in modern times. This principle has undergone the practice for more than one hundred years, and positively pushes forward the development of humanistic ethics and the market economy; therefore, it has been followed by contemporary contract law up to now. Since the middle of the 20th century, contemporary contract law has reassessed the value of formalism, as a result, it has arouse the interesting two types of tendency in the legislation of contract form. One is that some country have once again attach attention to the function and value of the contract form, such as evidence, avoidance of fraud, warning, provision of transactional information etc. More and more contracts are required that they "should" adopt written form, especially for the protection of the consumer or other disadvantaged party in the transactions; the principle of form freedom has been limited appropriately, the contract form seems to recover, and some scholars regard it as the renaissance du formalisme. However, the compulsory contract form is still the exception to the principle of form freedom; it is only the tool which legislator takes to satisfy certain objective and legal policy whose nature has changed from "effective form"(Wirkform) to "protective form" (Schutzform) or "objective form"(Zweckform). The other is that the international contract law still insists on the principle of contractform freedom. CISG 1980, PICC 1994 (amended in 2004) and PECL 1998 have all adopted the principle of "No form required", nothing in these convention or principles requires a contract to be made in or evidenced by a particular form. It may be proved by any means, including witnesses.Chapter Two discusses the current situation of formal contract and the difficult position that it faces. This article firstly analyzes the multiple functions of the formal contract and its essential objective. The reason why contemporary laws require certain contracts possess specific form is that the legislator intends to realize certain purpose by virtual of form. Originally, the role of form in legal order is no longer limited to proof, and has multiple functions which mainly include proof function, warning function, transparency verifications and provision of information, channeling function and so on (e.g., the examination and management of certain contracts). The purpose of the form requirement in the law is to protect the interest of one party, to maintain certain public interest, or to maintain the claim of third party that this kind of contract should have clarity and publicity. In the process of interpreting form provisions, the following fundamental theoretical issues deserve further review: whether the object pursued by legislators is justified, whether the compulsory form could realize that object; otherwise, if the compulsory form is easily applied for the purpose of the realization of certain function of contract form, it would be detrimental to the basis of freedom of contract and autonomy of private law. Therefore, the conflict between the compulsory form and freedom of contract should be carefully handled. In order to indicate the circumstances where the compulsory form is justified, the paper probes into the corresponding relationship between the purpose of formality and the compulsory form on the case-by-case basis."To maintain the parties' right" is one of the most important reasons to support compulsory form. The function of the compulsory form to protect the parties' interest mainly consists of three aspects: preservation of evidence,supervising and urging parities to transact carefully and make information transparent, the function of explanation. These functions only involve the private interest of the parties to the contract, and do not have direct relevance with the public interest of state and society or with the interest of third party; with regard to the realization of purpose of such norm, it is not appropriate to take the method of compulsory form, and it is wise to adopt advisory norms, leading and persuading parities of contract to follow certain behavior pattern for the purpose of maximize their interest, which is quite similar to the case of warning sign in the dangerous road section altering the driver and pedestrian. Otherwise, if the compulsory form were applied only for protecting interests of parties to the contract, it would go against the autonomy of contract. Moreover, although the compliance with the legal form might help to protect the interest of third parties to certain degree, it has very little relationship with the legal compulsory form and could hardly be convincing. Generally speaking, when and only when the contract relationship goes beyond the pure game of the parties' interest and involves the public interests, the specific form requirement could be invoked to show the respect that is showed by the law to the public interests.In respect of analysis of the relationship between the objective of formality and compulsory form, the issue in the modern society is not whether the freedom of contract form should be limited, but the scope, extent, and way of limiting freedom of contract form. Although the abstract illustration seems to be quite "eye-catching", its criteria seem to be too vague and are not practicable when it faces the task of deciding whether certain contract should be subject to compulsory form. Therefore, the article attempts to introduce the principle of proportionality of the public law, which might be of help to the solution of this difficult problem. With regard to the principle of proportionality, its function is to embody the balanced justice, i.e. to reflect the justice of law by balancing objectives and methods. Under this rational thinking pattern, the compulsory form could be verified from three aspects: (a)the justification of the form of formality; (b) the necessity of the compulsory form; (c) the compliance with proportionality relationship between the objective of formality and compulsory form, i.e. the assurance that the sanction against the formality defect shall not be out of proportion to the necessary degree for the realization of the objective. Because of multiple purposes of form, during the evaluation of the legal effect of form defect it might be improper to adopt single norm pattern that a contract is not concluded or void.Based on the above theoretical analysis, the paper further reviews the application scope of form contract and its selection of form in Common Law (with the major object of German law and French law), Civil Law and China's law, and the discusses the difficult problems faced by compulsory form. From the perspective of comparative law, the national laws of many nations are quite different in the application scope of legal form, and it shows the discrepancy in the attitude of states for the function and goal of formality. When the national laws require the contract shall be subject to certain form, the current required form is mainly the written one. In the case that one party to the contract is consumer or is disadvantaged, the consumers or the disadvantaged specially require the disclosure of certain transaction information. Therefore, if relevant formality rules only require the contract to be concluded in writing, and without the further requirement that the written content shall include certain basic matters, it would be of little help to the consumer or the disadvantaged to understand legal relations. On this point, some states require that these contracts shall adopt the form of standardized model contract; both parties can only generally accept or not accept these provisions, but they should specially negotiate if they would like to exclude the application of specific provisions. Since the model contract is made by the government or is subject to the approval of the government, it has taken the interest of consumers into full consideration.In the selection of the kind of contract form, there is a special issue inChina's Contract Law: whether registration and approval shall be the form of contract? In terms of registration, China's civil law theory has correctly indicated the essential difference between the form of obligatory contract and that of real contract, and the registration requirements in current laws should be the form of real right transfer or real right publication. However, it has omitted the discussion on the issue whether obligatory contract itself shall be formal contracts and what kind of forms shall be adopted. The paper points out that the real estate contract shall be formal contract, or the function of the object of the norms of real right transfer could hardly be achieved. However, the registration is the method of the transfer of the real property right in rem, and it is improper to be the form of real estate contract; the legal formality of real estate contract shall be written form. As to the approval, it is the administrative act in the public law, which has nothing to do with the declaration of will of the parties and which is not the manifestation form of the contract content; therefore, it does not fall within the category of contract form, and it is only a factor which affects the validity of the contract.Eventually, the article has probed into the different norm pattern of the legal effect of the violation of formality rules in the civil laws of many nations. For the formal contract, Common Law has mainly focused on the proof function of the formality, and resolves this problem in the litigation process. The consequence of formality defect is not the nullification of the contract, but unenforceable. German civil law emphasizes the cautious function, take the steps in the substantive law, and adopt the regulatory method of nullification; the nullification is the core of the effect assessment of the legal form defect. French law has divided the legal formality into two fundamental situation: one is that the compliance with the certain formality is the precondition to the validity of legal act; the other is that although the act lacking form is valid, this legal act could not be proved by the evidence in court, or it could not be proved by limited form of proof. China's laws have not general rules in the legal effect of the lack of formality, and relevant laws,administrative rules have made different stipulations for the effect of specific kind of contracts. In the theoretical and practical circle, it has led to the confused, disordered, and conflicting situation in the assessment of the validity of the legal form of contract. The dissertation has respectively reviewed the doctrine of essential condition of contract conclusion, the doctrine of essential condition of contract validity, the doctrine of proof doctrine, the doctrine of unenforceability, the doctrine of defensible validity. It believes that the contract form has been transformed to the nature of objective orientation, and the consequence of the violation of legal form stipulations should focus on the objective pursued by the relevant formality stipulation. Consequently, because of the multiple functions and purposes of formality itself, the effect assessment should also be diversified, i.e. the legal form rule is divided into the advisory rules and compulsory rules.Chapter Three discussed the correction of the formal defect. Because the objective of the formal norm might lose its necessity of regulation due to certain act of fact, the strict application of formal norm might lead to unfair outcome. It is necessary to establish other ways of correcting specific formal contract, and admit that the contract form defect could be cured under circumstances. It is represented by the Civil Law rule of correction by performance originated in German Civil Code, and by the Common Law famous doctrine of part performance.The key points of this chapter include three aspects: firstly, the explanation of Heilung in the German doctrine. Because of the model of curing formality defect by performance newly stipulated in Chinese Contract Law Art.36 is originated in Germany, we should more research the relevant doctrines of it after introducing the model. On the issue of the cure to formality defect, German Civil Code argues that the formal defect will lead to voidance of contract and refuses to accept general cure regulation on the side, but it institutes the regulation of correction by performance on special circumstances such as real property contract on the other side. Germanscholars outline several doctrines-the accomplishment of formal objective, the stability of law, the protection of reliance, ect. to support the Heilung in theory. To the application of analogy of the Heilung, German doctrine and practice generally maintain that the several Heilung cannot be applied by analogy with due care, that is, we cannot obtain the general principle from the several Heilung. Secondly, the exploration to the doctrine of part performance in Common Law. The value to observe the doctrine of part performance lies in that it has similar concept with the Heilung in German Law and Chinese Law. The dissertation will introduce the history background, the course of development and the general picture in modern society of the doctrine. This research in comparative law will let us well understand how to evaluate the validity of formal defect when the party (or the parties) has fully performed or partly performed.Thirdly, the analysis of Chinese Contract Law art.36. After the presentation of Chinese Contract Law, the key issue disputed by scholars on the validity of contract form is how to comprehend the regulation in art.36. From current papers and writings, we can find four understandings of this article: the establishment of contract doctrine, the validity of contract doctrine, the means of contract-making doctrine, and the correction by performance doctrine. The author argues that in grammatical interpretation, the objective of the article is to solve problems occurred by formal defect, not by the means of contract-making. The essence of the article should be interpreted as a special rule on curing formal defect by performance. Although Chinese Contract Law art.36 has absorbed the rule of correction by performance in German Civil Code, it has established general correction rule, not confined in several types of formal contract, which is different from German Civil Code in normative model. The author maintains that the general correction rule established by Chinese Contract Law art.36 can be considered as a wrong decision in legislative policy, and must be reviewed. The reason is that when legislator decide to find another mean to correctformal contract, they must pursue the equality between the compulsory form and free form and pay more attention to the conflict between the reliance interests of the parties and the public interests at the same time. Otherwise, the rash establishment of general doctrine of curing formal defect by performance before detailing the applicable conditions of correction by performance will inevitably eliminate the normative function of legal form, lead to "violation of system" in legal order, and form legal loophole.The author presents that we should reconstruct the rule of correction by performance based on the theory of reliance protection. The basis of the rule curing formal defect is not the accomplishment of formal objective, but the reliance protection. When the party has fully performed or partly performed, comparing with the pursuance of formal objective, the reliance state following the performance which stands prior status is more worthy of being protected. The rule of correction is the specific manifestation of reliance protection principle in Contract Law. On value estimation, the rule of correction reflects that the protection of reliance to essential condition facts of correction is prior to the achievement of formal objective. If the two cannot be achieved at the same time, legislator inclines to reliance protection, quitting the objective pursued by formal rule. But deciding whether the reliance is worthy of protection, we must weigh public interests and private interests. Correction by performance can only be applied to formal contracts that have no damages to public interests. This means that Chinese Contract Law should abandon the general provision of correction by performance, and accept the view that correction by performance can only be applied to several formal contracts.Chapter Four discusses the limitation of the application of formal defect and the approach to break the limitation. Because that there are often multiple objectives hidden in the request of formality, the method stipulating only one consequence of formality defect (such as the voidance of contract in German Law) can hardly achieve these multiple objectives all. In several cases,strictly applying the legal punish rule may produce unacceptable consequences. So it is necessary to harmonize the relationship among the foreseeability, the stability and the expectation to justice of law. Because of this, Common Law, French Law and German Law all adopt different principles or measures to restrict the core consequence of formal defect. The most representative doctrines or principles are the principle of good faith (bona fide) in German Law and the principle of estoppel in Common Law. The academic circles of China remains embarrassed silence on this issue. To Chinese Law which urgently requires the limitative measures to the voidance for formal defect, it is significant for reference that the principle of good faith in German Law and the principle of estoppel in Common Law break the rigidity of formality and form some meaningful theories or doctrines.The chapter respectively introduces the development, the important cases, the academic explanation and the future trend of the breach of strict formality by the principle of good faith in German Law and the estoppel in Common Law. Through comparative study, the author observes that to many cases, which have similar facts, German Law and Common Law will make same conclusions. From these cases and relevant academic explanations, we may find two fundamental factors: firstly, the action of one party will lead the other party to rely on that formality has provided or will be provided, and secondly, based on the reliance, the other party has done some actions and has got into adverse situation because of the actions. But the essential focused by Common Law and German Law are different: Common Law obviously highlights the change of situation of the other party (that can also be called "detrimental reliance"), and German Law pays more attention to the negative evaluation to the party who gives rise to the reliance of the other party. Besides this point, the attitude of German Law is conservative to the limitation of formality defect. It can be evidenced from two aspects: the one is that the negative evaluation to the party should be in higher degree, which means that the party has evil intentions or grievously breaches the bona fideobligation, and the other is that the other party's actions based on the reliance will endanger the normal living of him.Common Law pays more attention to the change of situation of the other party, which exactly conforms to the tendency merging the part performance doctrine into the estoppel doctrine in Common Law. To some extent we may figure that the performance or the part performance by the other party changes his own original status, and makes himself into adverse situation. Some German doctrines influenced by the development of Common Law above, argue that the rule of correction in German Law bases on the reliance protection. The argument will inevitably transform the traditional view of focusing on the negative evaluation to the party who gives rise to the reliance of the other party in limiting the voidance for formality defect by the bona fide doctrine, and will surely change the conservative attitude of German Law on the issue. If the essential, which formed from the practice limiting the voidance for formality defect by the bona fide doctrine and through which we can decide whether a contract lack of legal form is valid, will adjust according to the essential of the rule of correction, the traditional requirement to the liability degree will certainly decrease correspondingly. The transfer of key point will largely shorten the distance between German Law and Common Law in viewpoint.Based on the comprehensive observation and analysis of relevant cases and doctrines in German Law and Common Law, the author discusses the necessity of limiting the voidance for formal defect by the good faith principle in Chinese Law, and argue that we must consider two factors below when applying the good faith principle, which is very abstract and general, to breaking the mandatory formalities: firstly, we should consider whether the protection is sufficient provided by the claim in which the essential and the legal consequences are more specific on methodology, and secondly, we should establish the type and the essential of examining the validity of formal defect in order to avoid that the application of the good faith principle baseson some indefinite notions concerning equality and justice, which will undermine the stability of law.The author point out there are three basis elements should be considerate in its' interrelate application in Chinese law: firstly the party should be relied on validity of a contract, secondly, based on the reliance, the party changes his original property state, and the third, the other party, learned or should learn the formal defect, stimulates the reliance party to change his situation, or the other party deliberately lose his recognition of the change of the reliance party's situation, which usually happened on the experienced who well know the exchange. If the other party intents to breach previous promise by taking advantage of the formal defect from the beginning, been considered malice, even non malice, the party actually accepted the performance by the reliance party or not take action to prevent from the actions changing the original state by the reliance party, also attributes to this category. The importance should be focused on is that the essential examining the limitation of voidance for formal defect by the good faith principle should be more elastic rather than category deadly locked, most of time, up to the reality. To make the essential more specific and more classifiable, accumulation of relevant cases without doubt been regarded as very useful reference, still be needed more.