On The Privity Of Contract And Its Exception Stipulations

Contracts are agreements to set up, change or end relationship between rights and obligations among naturals, corporations and other organizations. Contracts, as a kind of debt relation, possess particular features different from other civil legal relations, such as property relation, that is privity of contact. Privity of contact is the necessary basis and prerequisition of contractual regulations and system and an important regulation that must be obeyed in the process of contractual legislative and judicial. The privity of contact is the inevitable extension of free principal of contracts and the reflection the free wills of parties in terms of the effects of contracts in times of free capitalism. With the development of modern market economy, the continuity and privity has become the basis of contractual laws in the 20th century. Merely observing strictly the relative of contracts becomes more and more difficult to meet the demands of balancing interests and realizing the fairness of justice, thus each state begins to allow exceptions of the relative of contracts to be considered.The exceptions of the privity of contact is related to the effect of contacts and the interest of the contacting parties. The evolution of the contact form the strict privity of contact to the exceptions of the privity of contact reveals the shift of the center of law from protecting the interest of the contacting parties to the interest of the society. Theoretically, there is not a unified criteria for judging the exceptions of the privity of contact. And different interpretations exist. How to define the exceptions of the privity of contact and understand the scope of the exceptions of the privity of contact is of much significance for understanding to what extent can the contact influences the social interest, the improvement of the legislation and the protection of the third party's interest. Meanwhile, it can guide a legislate judge for the third party who is always not the parties of the contact.The exceptions of the privity of contract mainly lie in the following elements, such as the third person infringing creditor's rights, the function of the third person'contract which was protected, the third person's responsibility for the profits, the third person's contract of profits, no broken business's lease, warrantor, saving the debt from damage, and the transfer of the debt. Some scholars advocate the exceptions of the privity of contracts should be saving the debt from damage, the third person's contract of profits, no broken business's lease, the function of the third person'contract which was protected, and the third person infringing creditor's rights, and others hold that the exceptions of the privity of contract should be transferring and acting as an agent of the contract, entrusting, insuring, the third person's contract of profits, and the third person's contract of profits.The exceptions of the privity of contract, is reflected in relevant articles in the legislations of countries. The French Civil Code provides: the contract is authentic only between both contracting parties. The contract must not damage the interest of the third party whom it allows to enjoy the benefit only in the situation as the article 1121 provides. The article 1121 also stipulates: when one party concludes a contract with another party or to whom he bequeathes is property, he has also to conclude a contract, which is taken as the term of the contract or bequeathment, with and for the interest of the third party... According to section 2, article 1372 in Italian Civil Code: the contract is only authentic to the third party within the situation as the law provides.Until nowadays, the legislators of all the nations have to admit the exceptions of the privity of contract. However, does it mean that the privity of contract totally declines in the contract law? Of course, the answer is negative. Even today the privity of contract still dominates the field of contract laws. It is still the fundamental principle and basis of the existence of all the institutions. Without the privity of contract, the judiciary system that has been established over years by the experts would not exist or the contract law would be replaced by infringement law. At that time, people would face"the death of contract". We should realize the reason why the privity of contract is such embarrassing situation is the social background on which the contract law depends has changed and the developing society needs new institutions. Under such circumstances, the privity of contract has to compromise and make a concession, thus the contract becomes more and more third-party involved. Therefore, it is an important step to improve the Contract Act of our country by means of maintaining the ruling role of the privity of contract as well as embodying it timely and appropriately with meeting the requirement of current development.Considering the analysis above, the lawmaking of China's contract law can improve the designing of legal system that is associated with the privity of contract from the following four respects:First, with the development of marketing economy, the third person's infringement of credit is growing more and more frequent, and countries have already provided legal relief for infringements of credit. As a result, in the lawmaking of China's Civil Law, the infringement of credit should be established as a special infringement. Some relevant legal issues should be handled to improve creditor protection and to be in line with international lawmaking, like making laws against credit infringement by enumeration, adding amendments to some relevant laws such as Code of Civil Law and Regulations of the Evidence of Civil Action, which includes clarified prescription on the burden of proof, establishing an independent legal system on credit infringement.Second, subrogation right and cancellation right of creditor should have the same status with the guarantee of credit, and be specified as the system of credit protection in the general rules of Civil Law. Meanwhile, subrogation right and cancellation right of creditor have the characteristics of both substantative law and procedural law, and its inclusion is far beyond the implementation of contract itself. The general regulation in Contract Law is not concrete enough to meet the demand of legal practice and to achieve the goal of making law on subrogation right and cancellation right of creditor. Therefore, making strict and elaborate legal expansion is helpful to promote the lawmaking on subrogation right and cancellation right of creditor.Third, complete legal rules on the third party beneficiary contract should be set up by improving the lawmaking on the third party beneficiary contract and referring to the relevant experience from other countries. The entire legal rules include both the general clauses in Civil Law and Contract Law and the provisions in special laws. The general clauses should clarify the time when the third party beneficiary contract was made and legal sense expressed by the third party, also endow the third party with the right to make direct request to the promisor, and specify the right and obligation of both party involved especially the promisor's range of defense against the third party. General clauses should include rules on the third party beneficiary contract of all sorts so as to provide all-round legal adjustment.In the fourth place, system-designing of"no break of lease with bargain"aims at protecting leases at weak status and maintaining transaction order. How to avoid unexpected risk for buyers on the principle of"no break of lease with bargain"becomes a significant issue. It is clear that public summons of leasehold is critical to protect the benefit of the new proprietor on the principle of"no break of lease with bargain". Therefore, establishing corresponding rules on public summons to protect the benefit of the new proprietor is an issue to be tackled in China's civil lawmaking.