The Impact Of Public Policy In Anglo-American Law On The Validity Of Contract

According to Contract Law Judicial Explanation (second)§14:the "mandatory norm" of§52(5) of Contract Law is mandatory norm of effectiveness. Based on this judicial explanation, a contract violates a mandatory norm of effectiveness limited in law or administrative regulation is void. However, it is a very intractable difficulty that how to identify the mandatory norm of effectiveness, wherever in theory or in practice. In Anglo-American law, courts usually invalidate contracts on the reason of "public policy" which, different from the Chinese contract law, is not a kind of norm with special characteristic. And the violation of it does not make a contract void directly. This article focuses on the comparative study of corresponding legal system in Anglo-American law, anticipating finding some valuable factors from it for the Chinese contract law.This article can be divided into three parts.In the first part, there are two main issues to be solved. One is that the concept of public policy in Anglo-American law, while the other is that the application of public policy by courts, that is to say, the function of it in the law of contract. Before the two issues, there is a brief introduction to basic concepts in Anglo-American law for the following two reasons. Firstly, some terms is absent in the Chinese contract law and they do not share exactly the same meaning even with the counterparts. Therefore, the clarification of terms is the base of the study. Secondly and more importantly, not only do these basic concepts of contracts have the function of definition, but also they reflect the fundamental idea and logic system of the Anglo-American contract law. Based on these concepts, the article finally defines the meaning and content of public policy by searching its history. Form one aspect, the content of public policy contains policies confirmed by the precedents, policies of statutes, legal principles and other social interests deserving protection. From another aspect, according to different subject who declares public policies, there are policies from the legislation and from the judicature. At last, the relation between public policy and validity of contract is that when courts deny the validity of contract, the condition that the interest of party autonomy is outweighed by the interest of public interest must be complied, which means that the process of judging the validity of contract is balancing interests.The second part focuses on explaining the considerations of courts applying public policy in cases of different classifications. And the classification based on the subject who declares public policies, that is to say, where do those polices drive from-legislation or judicature. There are different considerations in different origins. When the public policy derives from legislation, courts put their attentions on the purpose of legislation and how the contract associate with public policy; when it comes for judicature, courts usually use "the rule of reason" to decide the validity of contracts, which is to say that courts are reluctant to invalidate contracts unless public interest was injured and the damages can be proved.In the third part, this article compares the way that the validity of contract judged by the Chinese contract law and the theory of public policy for the purpose of finding useful factors. First, this part analysis the characteristics in the Chinese contract law in deciding the validity of contract and points out the defects. The root cause invalidates the illegal contract is that the interests of the individual autonomy overweighed by the public interests. Therefore, the right way to judge the validity of the contract is balancing the two kinds of interest. Nevertheless, our contract theory focuses only on the method of legislative explanation in order to distinguish the norms representing the most important interests and named them mandatory norms of effectiveness which invalidate contracts without checking how contracts associate with illegal acts. This approach totally ignores the private interest. Although a contract violates the law, this interest is not necessarily denied as a whole. Through the comparison between the Chinese contract law and Anglo-American law, three valuable considerations can be pointed:the protection of parties'justified expectations, the way of balancing interest in judging the validity of contract, the valuable factors deserved contemplation during the balancing process.