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The Application Of The Rule Of Foresight In International Project Contracts

Posted on:2008-10-13Degree:MasterType:Thesis
Country:ChinaCandidate:X P JiangFull Text:PDF
GTID:2166360242459299Subject:International Law
Abstract/Summary:PDF Full Text Request
As one of the most important rules to limit the recovery of contract damages, the rule of foresight is presented in the laws of every country. The core meaning of this rule is that the party who has breached the contract shall only be assumed responsibility for the contract damages if such damages are in this party's contemplation, at the time of contracting, as a probable consequence of a breach of contract. The author makes a general introduction of the rule of foresight in the beginning of this paper, taking the international project contracts as example, in combination with specific cases and engineering experiences, and then mainly focuses on the application of the rule of foresight in the international project contracts. This paper is composed of the following five sections:In section one, the source and development of the rule of foresight is traced, the development of this rule in French law, common law, and the Chinese contract law is analyzed in sequence. The theoretic basis of the rule of foresight is further elaborated, with the major introduction of three theories: the theory of autonomy of will, the theory of fairness and the theory of efficiency.In Section two, the content of the rule of foresight and the standard of foreseeability is discussed. The content of this rule includes the subjects, time and the scope of foresight.The standard of foreseeability is further analyzed to reach the conclusion that the contract parties, contract contents, contract price shall be considered as general standards of foreseeability. However, the specific cases shall be considered too, such as prior statement.Section three is the major part of this paper, which is focused on the application of the rule of foresight in the international project contracts, taking the FIDIC contract terms as example, and elaborating the application of the rule of foresight to define the contract damages including both the substantial loss and expectation damages. Regarding the claim for the substantial loss, the most typical and controversial case is the"Unforeseeable Physical Conditions", which states that when contractor encounters unforeseeable physical conditions, the extra costs thus incurred shall be borne by the owner. To avoid such circumstances, the owner shall perform the geological investigation on the site before signing the contract, and provide contractor with complete and accurate investigation data or the access to such data or in other means; As to the recovery of expectation damages, the typical example is that the contractor shall be entitled to the recovery of the expectation damages if the contract is terminated or partially terminated due to the owner's reasons. The recognition and limitation to the expectation damages shall also conform to the rule of foresight. Therefore, to enable the damages foreseeable to the owner, the contractor shall provide the detailed contract price breakdown reflecting the profit ratio to the owner before contracting.Section four refers to the limitation and adjustment to the rule of foresight presented in international project contracts. The rule of foresight as a limitation rule to the contract damages needs to be limited itself. It does not conform to the justice principle of contract if the party who breaches the contract shall be assumed of responsibility for all the loss and damages caused by such breach of contract. Moreover, the parties shall be discouraged to entering into a contract if they are required to bear too much risk to execute this contract. Therefore, the maximum liability is usually limited in an international project contract to limit the types and amount of the losses and damages caused by the breaching party, so that not all of the losses and damages caused by the breach of the contract shall be of breaching party's responsibility. Moreover, the time of foresight shall not be fossilized to the moment the contract is signed, as the contracting for an international project is a dynamic process.In Section five, based on the current status of the rule of foresight in China's legislation, suggestions are proposed to improve the rule of foresight in China's legislation, in the aspects of standards of foreseeability, scope of losses & damages, and the exclusion, limitation and adjustment of the rule of foresight to make it more abundant and definitive. During judicial practice, typical cases of the same type of contract such as international project contracts shall be summarized as the judicial precedents to direct the practice.During the execution of the international project contracts, which usually has high investment, multi-interfaces and long construction period, the breach of contract is almost inevitable for each party. The rule of foresight therefore plays a very important role to limit the type and amount of losses and damages caused by the breach of the contract. Since China's membership of WTO, international cooperation has been prospering with more and more engineering companies getting involved in international contracting market. Only through the improvement to legislation in China and understanding of the law and regulations by the China's engineering companies, so as to reasonably split and avoid risks before contracting, shall our engineering companies properly use the rule of foresight to protect them from losses and damages during the contract execution in this increasingly competitive international contracting market, especially during the contract claim and anti-claim practice.
Keywords/Search Tags:The Rule of Foresight, International Project Contracts, FIDIC Contract Terms
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