Study On Substitute Transaction

The basic purpose of default remedy is to compensate the aggrieved party to the end of putting him in the position he would have occupied had the defendant honored the contract, that is, protect the expectation interests. To achieve this goal, many countries accepted substitute transaction. Based on "American Uniform Commercial Code," this paper study substitute transaction in four parts.The first part of analysing the traditional remedies on the inherent defects, combined with the purpose of the protect the aggrieved party's expectation, drawing an substitute transaction with unique comparative advantages. Traditional remedies have two kinds, including market-price damages and specific performance. The former usually compensate the aggrieved party based on the market price, which often results in inadequate compensation or excessive compensation to the aggrieved party. And, once the market prices increases, the kind of relief to the aggrieved party may assume the risks inherent in the market. Finally, the kind of relief is also subject to loss of foreseeability and other restrictions. On the contrary, specific performance is an effective way to achieve relief of the aggrieved party, but there are many defects including mandatory which may result in speculative execution error, as well as conflict with mitigation rule. Compared with these two remedies, the substitute transaction has unique advantages, such as being close to the indifference principle, to achieve a reasonable allocation of market risk, and complying with the mitigation principle.The second part, taking cover to the buyer as an example, analyzes the substantial and procedural elements of substitute transaction. substitute transaction is divided into two stages including the search and the actual choice. First of all, the buyer should be reasonably carried out the search for substitute. It has three elements:time requirements without unreasonable delay, site delivery of the goods not limited to the location request, prices not required to obtain the lowest price. Secondly, the buyer should choose a substitute in good faith. To judge the reasonableness of the buyer to conduct the search must take into account various factors, from the whole to grasp. Finally, the buyer's cover also should replace the breaching party's not delivered goods. Subject to the three substantive requirements, the buyer can be allowed to obtain the cover relief, and no longer need to satisfy any procedural elements. On the contrary, the seller's resale also should comply with the above-mentioned elements in addition to fulfilling the duty to inform, and the contents of the notice by way of a public or private resale vary. However, both cover and resale can be conducted without the need for court proceedings.The third part is the application of substitute transaction and the calculation of damages based on this remedy. substitute transaction can be applied to commercial and consumer parties. Meanwhile, substitute transaction is an arbitrary remedy, the aggrieved party can choose according to personal circumstances market price or substitute transaction remedy. Substitute transaction can be applied to other cases of breach of contract, including the buyer's improperly rejecting acceptance of the goods, or failing to pay the due price as some, or dismantling in part or whole contract, the seller not delivering the goods, and dismantling the contract, or the delivered the goods not meeting the purpose of the contract and not realizing the contract, the buyer just refusing or revoking acceptance. However, once the buyer accepted the defective goods he is not supposed to have rights of substitute transaction remedy, the seller can only guarantee his responsibility to reduce loss. Substitute transaction remedy is calculated by substitute transaction price less the original contract price, plus incidental damages and consequential damages, deduce of the expenses saved by the aggrieved party in consequence of the defendant's breach.The fourth part, is about China's "Contract Law" proposal to introduce an substitute transaction regime. China's "Contract Law" also established the expectation damages principle, however, how to achieve the principle "contract law" is still not completed. The substitute transaction regime has unique advantages, it is necessary to introduce it into China's "Contract Law", in order to effectively protect the aggrieved party's interests.