A Study On The Exercise System Of Rescission Right Of Contract

The discharge of contract is accomplished when the contract system developed to a certain degree. In Roman period, the laws emphasizes on the principle of obeying the contract, when one party of the contract failed to practice the contract, the other party only enjoys the right of demanding compensation, not the right of discharging the debts of both parties, therefore, the rescission right of contract is not practiced in Roman legal system. With the development of commodity economy, the rule that"a contract must be obeyed"is violated gradually. Within the continental legal system, the Civil Code of France is the first to set up the system of discharge of contract with limited breakthrough in the rescission right of contract. After that Civil Code of Germany and Civil Code of Japan standardizes the conditions of the rescission right and the procedure of rescission. Within the Anglo-American legal system, Britain divides the entries of contract into two categories: terms and guarantees. When the involved party violates a contract's term and constitutes basic violation, the other party should enjoy the right of discharging a contract. Later, with the accomplishment of the"intermediate term"the system of discharge of contract is further developed and perfected. A general opinion holds that the fundamental of discharge of contract is the practice of rescission right which is practiced by the involved party and validates a contract. This thesis discusses about the fundament of the system of discharge of a contract, its practical conditions, procedure, legal effects, and its potential perfection in order to contribute to the perfection of our country's Civil Code system and the system of discharge of contract.The first chapter gives a semantic explanation to rescission right of contract and defines the terms involved in this thesis such as contract, discharge of contract, and the rescission right of contract and the connotation and denotation of them. The method of argumentation applied here is laddering. The premises of the whole thesis is the definition of"what is the rescission right". The concept of contract within the continental system originates from Roman Code and is adopted by the civil code of France and Germany. The Anglo-American system observes the basic of a contract as a promise. But now both continental and Anglo-American system's concepts on contract tend to be unified. In general, contract refers to the agreement between natural persons of equal parties, legal person, or other organizations'setting up, alternation, terminations of the relations of rights and obligations. This thesis argues that the core of contract is the freedom of contract. In the fulfillment of contract when the condition for the discharge of contract occurs, the contract should not be discharged certainly but until the practice of party who enjoys the rescission right and applies it to terminate the contract. The rescission right of contract refers to the right which enables the person involved enjoys the right to validate a contract when certain condition is given after a contract is set up and before it is fulfilled. The legal nature of rescission right is the right of formation and includes conventional and statutory right of contract termination.The second chapter argues about the value and theory foundation of the discharge of contract, it is a justification on it. The principle of justice which has evolved from formal justice to substantive justice justifies the validity of discharge of contract. The influence of principle of justice can be found in various reasons for discharge of contract. On the other hand honesty and credibility lay the theoretical foundation of discharge of contract. The principle of honesty and credibility as a king provision in civil law signifies the legislative purpose of the executive system of discharge of contract system and provides practical theory and standards of prejudication. To sum up, the exercise of the system of the rescission right reflects the principle of justice, and it can fulfill the ultimate goal of contract justice with the honesty principle as its foundation.Chapter three is a survey of discharge of contract in foreign laws and a comparison study of discharge of contract between the two legal systems, especially the reason of discharge of contract, and generalizes the external similarities and differences and internal origins of discharge of contract in various countries'legal system. From the above survey, the countries being surveyed tend to grant the rescission right to the involved parties and at the same time necessary limitations are also legislated, and a tendency of the two legal systems'mergence is discovered: first, a legislative standardization of the reason of exercise of the rescission right; second, a transaction from legal terms to legal effects of the definition of the reasons of the rescission right; third, contract freedom principle exerts great effects in the system of discharge of contract. Chapter four offers a deep exploration on the reason of discharge of contract. The reason of discharge of contract reflects the principle of freedom of contract, which differs from negotiated settlement in two ways: early promise and later negotiation. The legal reason for discharge of contract is the core of the executive system of discharge of contract which includes: one, objective facts i.e. force majeure and substantial change of circumstance; two, fundamental breach of contract which includes anticipatory breach and actual breach and so on. In this part, different breaches of contracts are discussed and definition is given to fundamental breach of contract. The existent value of fundamental breach is its legal limitation of the rescission right, practical value of it is to offer more remedy opportunities for the contract breach party in order to avoid suffering from minor breach of contract, according to which can the realization of justice come true.Chapter five is an argument about the procedure of the application of rescission right and is an analysis on the judicial feature and legal significance of the procedure. A scientific procedure of the rescission right is a guarantee of the realization of the justice goal, of the party enjoys the rescission right realizes its right, of the contract maintains a remedy for the related party. This chapter summarizes the valid period of the rescission right, it points out that the valid period of the rescission right depends on the initiation and termination time of the rescission right, the valid period of the rescission right depends on the variety of the reason of the rescission. As to how to exercise the rescission right, this thesis holds the opinion that it should be a combination of the termination of notice and accusation and the right of choice is granted to the party which enjoys the rescission right. The issue concerning the limitations of the exercise of the rescission right is discussed as limitations to the subject of the exercise.Chapter six argues about the result of the application of rescission right. The center of argument is on the retroactive effect and indemnity. The retroactive effect is the center of legal effects and it is also a distinct feature of rescission right when compared with other legal rights. The author believes that based on principle the retroactive effect covers the past but the non-continuous contract should be treated as an exception and the force should not cover it. The reinstatement and indemnity exert a protective effect. This thesis holds that the indemnity due to the exercise of the rescission right should be the reliance interest of the related party. For a second thought, in order to avoid obvious injustice, the indemnity should be checked by the expectation interest.Chapter seven is a collective reflection over the system of rescission right of our country, and thoughts are given to the draft of our country's Civil Code, the limitations are points out here. Several systematic principle concepts are raised and suggestions aiming at our country's legislative perfection are given to the executive procedure, legal effect, especially the reason of application of discharge of contract, the legislative suggestion on the reason of the exercise of rescission right of contract are specifically given, they are: the alter of scenario principle, perfection of the code of anticipatory breach and suspending performance, and setting up the entry of"purpose of contract".