A Study On Legal Issues Of Rescission Of Contract

A contracting party shall be granted a rescission right of contract to unilaterally exempt himself from his own obligation and get rid of the binding force of debts under certain legal conditions. The rescission right of contract effectively balances the rights and interest between the parties and provides guarantee for a free and secure transaction. In view of its unique function, the system of the contract rescinding is a significant part of the law of obligation. The system of contract rescission has been stipulated by different countries and regions according to their regional situations.Certain international conventions and model laws also prescribe the system of contract rescission. With the development of economy and society, the system of rescission of contract has been perfected gradually. By using other countries'regulations for reference and absorbing foreign legislations, the Contract Law of China prescribes the system of contract rescission in terms of its national situation. But when we analyze and apply the specific regulations, we find some deficiencies in the legislation. On the basis of Chinese Contract Law, the thesis will focus on several important aspects of the system of contract rescission by means of studying the legislative trend in the world and relevant academic thoughts. Besides the introduction and conclusion, the thesis will be divided into four parts:The first chapter will summarize the system of contract rescission. The first segment discusses the category of the system of contract rescission. Should rescission by agreement be excluded from the rescission system? The author thinks that the rescission system should only contain the unilateral rescission. The second question to be studied is whether the effectiveness of contract rescinding is retrospective. The author puts forward the opinion that the object of rescission is debt relationship in narrow sense that is payment obligation relations and the contracting parties are exempted from payment obligations after contract rescinding. Furthermore, the author holds that the legislative mode of German civil law which differentiates between rescission and termination is more reasonable. The second segment firstly introduces different kinds of rescission right in Chinese Contract Law, and then analyzes the essence of the right of termination without any reason and the legal effect of the exercise of the right. The third segment discusses the rescission of revocable contract and how to deal with the conflict of the rescission right and the revocation right.The second chapter explores the conditions of legal rescission. The ninety-fourth article of Chinese Contract Law is drawn on the basis of the absorption of the system of fundamental breach of contracts in the common law and the analytical structure of various forms of inappropriate performance of contractual obligations in civil law. According to the characteristic of the specific article in Contract Law of China, the thesis explores the fundamental breach of contracts and discusses the constitutive elements of the legal rescission right combined with the analytical frame of various forms of breach of contracts after analyzing the specific regulations.The third chapter discusses the exercise and extinguishment of the rescission right. The first segment discusses several problems of the exercise of the rescission right, these problems are as follows: the way of exercise of the rescission right and the right of dissent, the exercise of the rescission right in the third party beneficiary contract. The second segment analyzes the extinguishment of the rescission right and puts forward some opinions about several usual reasons of the extinguishment of the rescission right.The fourth chapter discusses the retroactivity of the rescission of contracts. The first segment discusses several doctrines of retroactivity as follows: The first theory holds that the contract is exterminated immediately after rescission and the effect of rescission is retroactive; The second theory holds that the object of rescission is debt relationship in narrow sense that is payment obligation relations; The third theory holds that a bilateral contract consists of two unilateral-duty contract and the object of rescission is the exchange relation of the two unilateral-duty contract. The second segment firstly discusses the theory of non-retroactivity and related legislations, and then explores the essence of the theory of non-retroactivity. The third segment makes a comparison study on the various kinds of theories of retroactivity and discusses whether the theories can provide the right of restitution and the right of damage compensation with a reasonable legal foundation. The author holds that the object of rescission is debt relationship in narrow sense that is payment obligation relations and the contracting parties are exempted from payment obligations after contract rescinding. Finally the thesis discusses the distinguishing principle of retroactivity. To this point, the author holds that the legislative mode of Chinese Contract Law which didn't differentiate between rescission and termination is the reason why the distinguishing principle of retroactivity is proposed. The author approves of the legislative mode of German civil law and holds that we should prescribe the system of contract rescinding in accordance with non-continuing contracts and the system of contract termination in connection with continuing contracts by using experience of German civil law for reference.