On The Rescission Of A Contract

As to the concept for the rescission of a contract, different legal system has different understanding. The theoretical world also has different understanding about it. Based on the analysis of different opinions, we believe that natural rescission is in the category of the rescission of contract. And we define it as a legal system, which refers to the original or future rescission of an effectively made contract. The rescission is made naturally or with one party's declaration of will for the two parties'declaration of will or when certain conditions are provided. For the characteristics of the rescission of a contract, we hold that the most essential one is the beforehand elimination of the congruence relation when the aims of the contract cannot be realized, so that the fulfillment of the contract becomes unnecessary. And this is the nucleus of the system of the rescission of a contract. As for how to define the types of the rescission of a contract, certain divergences exist in Chinese jurisprudential circle. The divergence is mainly focused on whether the rescission by agreement should be included in the rescission of a contract. Chinese Law of Contract stipulates three kinds of the rescission of a contract: legal rescission, appointed rescission and rescission by agreement. The characteristic of legal rescission lies in that the law directly stipulates the conditions for the rescission of a contract. And when the conditions appear, one party can straightly execute the right of rescission to relieve the contract according to law without the permission of the other party, It is obvious that legal rescission is a kind of unilateral act. Appointed rescission is the essential supplement of legal rescission and is the embodiment of contractual principles of liberty in the system of the rescission of a contract. Rescission by agreement is essentially to achieve the aim of the elimination of the validity of a contract by way of a new contract. Legal rescission is the most extensively applicable type of the rescission of a contract, thus this paper focuses on the conditions of legal rescission and discusses from two aspects: foreign legislation and domestic legislation. As to foreign legislation, French Civil Law, German Civil Law, Anglo-American laws and some concerned stipulations about the conditions for legal rescission in United Nations Convention on International Marketing of Goods are introduced. Chinese Law of Contract drew the legislative experiences from the two main legal systems and Agreement between States, and made relatively strict restriction on the conditions of contractual legal rescission. For the constitutive requirements, way of execution and legal consequence, discontent and contradiction exist in Chinese contractual system of the rescission of a contract due to the multi-faceted conditions of rescission. This paper only makes an analysis on the four problems in Chinese contractual system of the rescission. The first one is about the five situations of the contractual legal rescission. The change of event was not stipulated in the conditions of the contractual legal rescission, so that similar phenomena in actual life were not disinterestedly corrected. Therefore it is necessary to introduce some beneficial experiences from foreign countries to establish essential systems. As to the anticipated system of the breach of contract, the stipulations in Chinese Law of Contract are too simple and abstract, so that judicial discontent is easy to bring about. For the delay of performance, Chinese Law of Contract stipulates: "no performance is taken in a reasonable period after being urged", but the law did not stipulate the time limit. Thereby some modification and perfection should be made in legislation. The second is about the way of execution for the contractual right of the rescission of a contract. Clause 96 in Chinese Law of Contract stipulates that the execution of the right of the rescission of a contract should inform the other party, and when divergence exists, they can appeal to People's Court or arbitral agencies to confirm the validity of the contract. There is disputation about the understanding and applicability of this clause in judicial practices. And the disputation lies in whether the declaration of will for the rescission is a necessary procedure. In the theoretical world two views exist: the positive view and the negative view. This paper holds that the court cannot make direct verdict to relieve a contract without the information to the concerned party either for the intention of legislation, the efficiency of lawsuit or for the protection of the lawsuit right of the party. Clause 95 in Chinese Law of Contract stipulates time limit for the execution of the right ofthe rescission of a contract, but no further definite restriction is made, so that the relationship of right and duty between the two parties is put into an unstable situation. Thus disadvantageous effect on the security order of contract arouses. Therefore, the defect should be modified in Chinese Law of Contract. The third is about the power to trace back for the rescission of a contract. There is no definite attitude toward this in Chinese legislation. This paper holds that no matter for keeping the inside harmony of the legal system, or for the protection of the party's rights and interests and social order, the rescission of a contract should have the power to trace back in principle. It is indefinite about it theoretically, and the fundamental reason lies in the fact that the understanding for reinstatement is too narrow and needs correction. The fourth is about the scope for the compensation of the rescission of a contract. Legislation in all countries can be summed up into three views: firstly, the doctrine of choice, which holds that there is no coexistence of the rescission of a contract and the compensation; secondly, the doctrine of coexistence, which insists the coexistence of the rescission of a contract and the compensation for the unfulfillment of the debt; thirdly, the doctrine of coexistence, which insists the coexistence of the rescission of a contract and the compensation for the damage of the negativeinterests. Chinese Law of Contract confirms the coexistence of the rescission of a contract and the compensation. But as for the scope of the compensation, disagreement exists. This paper insists that it should include not only the compensation for the rescission but also the compensation for damage owing to unfulfillment. This paper offers four suggestions for the perfection for Chinese contractual system of the rescission of a contract. Firstly, the perfection for the conditions results in the rescission of a contract. The change of event should be developed step by step, and the clauses about anticipated breach of contract should be reformed. According to German legislative experiences, the differentiation to the before and after refusal should be eliminated, instead the commonly applicable rules of "refusal of fulfillment"should be applied to. The Right that contradicts uneasily needs to be extended. For the situations in which delay of performance is in need, the deletion for the restriction of "being urged"is suggested. This ensures the parts to protect their legal rightsmore promptly and effectively. Secondly, the definite time limit for the execution of the right of rescission. Analogy of the second item of clause 15 in "About the explanation handling several questions of applicable law of dispute case of deal contract of commodity apartment"by The Supreme People's Court is helpful to the applicability of "reasonable time limit"in judicial practices. Thirdly, the definite stipulations for the power of trace back in the rescission of a contract. I have mentioned above that rescission means elimination. If the rescission of a contract has no power of trace back, then the inconsistent with the meaning of elimination will be brought about. For its legal function, the possession of this power is beneficial to the benefit protection for the party, who does not breach the contract. From the point of view of the harmony of legal systems, the principled possession of this power is based on the distinction between the two legal concepts: the rescission of a contract and the termination of a contract. Stipulations about the applicable conditions and consequences should be made in Chinese legislation. Fourthly, further expansion for the scope of compensation. There is no definite stipulation for the criterion of compensation in Chinese Law of Contract. This paper suggests further expansion, namely the principled compensation for the loss due to the rescission results from the breach of contract. The reason is, as a kind of remedy, the rescission of a contract is aimed at remedying the performance interests under the normal situation, and it is anticipatable and does not aggravate the responsibility of the delinquent party. Moreover, clause 113 in Chinese Law of Contract and clause 112 in General Principles of Civil Law reflect the principle of total compensation. Therefore, it is feasible to compensate the loss of interests theoretically and in legislation. But the compensation should depend on special situations. If the non-delinquent party does not take proper actions to prevent from the expansion of loss when the other party breaches the contract, no compensation for expanded loss should be endowed.