A Study On Fundamental Breach Of Contract

The system of fundamental breach origins from the british law. It is considered as the special kind of the breach of contract. In generally, fundamental breach means that one of the parties breach the essential term of the contract results in such detriment to the other party which substantially deprives of him of what he is entitled to expect under the contract. In this circumstance, the non-delinquent has the right to rescind the contract and appeal for compensation. Since it has established, it has the profound influence both on Common law system and Civil law system. Civil law system adopts the system of rescinding contract which is similar to the fundamental of breach. The 1980 United Nations Convention on Contract for the Internation Sale of Goods (infra CISG) adopt the system of fundamental breach and defind it. The Article 94 of Contract Law of People's Republic of China actually established the system of fundamental breach.This essay tries to discuss the system of fundamental breach in five aspects. Part one introduces the Basic theory of fundamental breach including the establishion, the development and the tendency. British law has changed the criteria of fundamental breach from articles to results. As to the nature of fundamental breach, it is not a new form of breach, but a kind of description of the degree of breach. The second part compares the criteria of constitution of fundamental breach. Analyzing the different criterions of the representative countries both Common law and Civil law, especially the criterion of CISG. Early in British law, the courts divide the contractual articles into"condition"and"warranty"according to the importance of the articles. Only the breach of"condition"will lead to fundamental breach. Recent British law abandoned this approach, instead of putting most of the contractual articles into intermediate term. American law based on the different consequences of the breach dives the breach into material breach and minor breach and the breach of material breach constitutes fundamental breach. In civil law system, most countries set up the rescinding system which is formed around the results. There are two criterions about fundamental in CISG, one is the seriousness of the consequences of breach, and the other is the foreseeablity of the results of breach. Part three comments on the criteria of constitution of fundamental breach and analyzes the different kinds of breach under the criterions. The criterion of fundamental breach is established through the constitutive elements of fundamental. In a word, the constitutive elements include the seriousness of the consequences of breach, the foreseen of the results of breach and the fault of the breach. The author rejects the foreseeablity of the results of breach and the fault of the breach as the constitutive elements of fundamental breach. Part four discusses the legal consequences of fundamental breach. It is mainly consist of the rights to rescind contract, the application of exemption clauses and the transfer of risk responsibility. Lastly, author points out the shortcomings of Contract Law in our country and gives some suggestions.