The Discretionary Right To Terminate A Commission Contract And Its Limitations

Article 410 of the Contract Law of the People's Republic of China provides the discretionary right to terminate a commission contract, e.g. the right of the parties of a commission contract to terminate the contract at their own discretion without any reasons or the prerequisite that the other party breaches the commission contract. The discretionary right to terminate a commission contract should be considered as an unique termination system with its own features. The reason why scholars hold that both parities of a commission contract enjoy the discretionary right to terminate the contract is that the commission contract is based upon the mutual trust of its parities. Once such mutual trust is destructed, the commission contract will lose its foundation of existence. However, in judicial practice, it's possible that the parties of a commission contract may, at will, terminate the contract claiming that they have no trust on the other party any more, which could generate some negative impact. Therefore, it's necessary to conduct study in this area. This thesis is consisted of four sections:Section One discusses the features of commission contract and the discretionary right to terminate such contract. Based upon understanding of these features, this thesis points out that the discretionary right to terminate is an at will termination right in nature. In addition, this thesis discusses the possible concurrency between the discretionary right to terminate and the general statutory rights to terminate in judicial practice, as well as the solutions to such concurrency.Section Two introduces the historical origin of commission contract and the discretionary right to terminate thereof. Through the view to the Roman law and analysis on the modern legislation of commission contract of certain countries, this thesis comes to a conclusion that the reason for the transformation from commission for free to commission for value lies in the different regulations on commission in different codes in specific historic periods. Only the commission contract for free can be terminated at will. While for the commission contract for value, exercise of the discretionary right to terminate is restricted by most countries in the principle of good faith and fairness.Section Three of this thesis points out the problems existing in the application of Article 410 of the Contract Law in court hearings. The discretionary right to terminate a commission contract may cause abuse of right. Therefore, this thesis proposes to use the"interpretation theory"to give reasonable explanation to the"damage compensation"as sets out in Article 410 of the Contract Law and impose certain restrictions on it.The last Section is the continuance of Session Three and is the emphasis of this thesis. This Section classifies the damage compensation as sets out in Article 140 of the Contract Law into two scenarios e.g. commission contract for value and commission contract for free, and gives elaboration on these two scenarios respectively. For a commission contract for free, the provisions of German Civil Law should be referred to e.g. only the agent is bounded by the compensation liability under"termination in unfavorable period". For a commission contract for value, this thesis categorizes the circumstances that may cause damage compensation into different types and discusses each circumstance separately. In addition, this Section also analyzes the effect of the special clauses abandoning the discretionary right to terminate a commission contract that are common in practice, and points out that abandonment of the discretionary right to terminate a commission contract is contrary to the nature of commission. Meanwhile, given that the damage suffered by the other party has been compensated under the circumstance of damage compensation categorizing, the special clauses abandoning the discretionary right to terminate a commission contract should not have any legal effect.