Research On The Application Of The Foreseeability Rule In Contract Law

The foreseeability rule is an important rule for limiting damages'compensation in contract law, which originated from France and was developed in Anglo-American law by a series of cases, such as Hadley v. Baxendale(1854). Now it has been adopted by most of countries in the world. Researches on foreseeability rule have been carried on for such a long time in foreign countries, but such researches and judicial practices are few in China even though we have employed this rule in our legislation. Therefore, the thesis tries to do some researches on the application of foreseeability rule, basing on the compare and analysis of relevant laws in several countries. And it is divided into four parts.Part One analyses the theoretical premise to the application of foreseeability rule. First of all, the foreseeability rule exists because of its rationality. This rule and its new development were discussed by scholars from several countries when Hadley v. Baxendale(1854)'150 years old birthday was held on the spring in 2005. The significant status of the foreseeabillty rule was confirmed again in this conference that this rule adequately materialize the unification of liberty, efficiency and equity. Secondly, the relationship between foreseeability rule and other correlative theories is another theoretical premise. The foreseeability rule and adequate causation are similar in intension and theoretical basis but different in cognitive time. The foreseeability rule manifests the idea of duty to revealing information but it is not suitable to identify it as legal obligation. The development of foreseeability rule in contract law has been deeply influenced by foreseeability rule in tort law, but they are different in function and basis of responsibility.Part Two is mainly discussing the applied scope of the foreseeability rule. The general scope is damages'compensation in breach of contract. But, was this rule applied in some special situations in contract law? In the author's opinion, the foreseeability rule can be applied in willful breach, defect liability of the agreement/contract and the non-economic damages'compensation with a little change according to the occasions. For example, the time of foreseeability on the occasion of willful breach should be changed as the time of establishing contract, and it is applied in defect liability of the agreement/contract only when the direct damages exceed the scope of foreseeability. Furthermore, the foreseeability rule is completely excluded when there is fraudulent, disproportion between risks and benefits, and dangerous contracts.Part Three describes the material conditions to the application of the foreseeability rule. To the subject of foreseeability, the regulations in several countries are different. Such as the subject is both of the party in a contract in British law, while the subject is the breaching party in American law. The author agrees the latter, because it is reasonable to observe damages in the position of the breaching party for the consideration of causality and equity. This choice can not only punish the breach party, but also compensate the victim and improve the victim's good faith. To the time of foreseeability, there are three kinds of theories. The thesis insists that we should choose the time of establishing contract in general occasion and choose the time of breaching contract in special occasion such as willful breach. To the content of foreseeability, the thesis insists the compensating scope includes the direct damages and actual interest. Actual interest means the gross profit, including the net profit and the overhead. As for the compensation having been paid to other person, a retaining fee and the legal cost, as the thesis holds, are beyond the foreseeable scope in general occasion but in special occasions.Part Four is about the study on the judgement on foreseeability. To the problem of standard to the judgement, there are three kinds of theories, which are the subjective standard, the objective standard and the united standard. Concretely, on the premise of the standard of'reasonable man', we still should consider the special ability to foresee of the breaching party. To the application of standard to the judgement, there are some definite processes. First of all, the facts should be affirmed, such as what the breaching party knows and how much has been foreseen. Secondly, if we can't confirm whether the breaching party foresee the damages or not, we should use the standard of'reasonable man'and the same time consider the special ability to foresee of the breaching party. Furthermore, there are other factors which will influence the standard of judgement on foreseeability, including subject factors, object factors and so on. The subject factors are the status of plaintiff, the status of defendant and the economic ability of defendant. The object factors are the content of a contract, the place of establishing a contract and the consideration of a contract. The popularity of a law and the reveal of special information will influence the judgement in a certain extent. Certainly, the discretion of a judge is the factor that can't be ignored in the judgement on foreseeability.