Research On The Theory Of Efficient Breach

The theory of efficient breach of contract has a long history while the study in China stays at the access, as most relative research intensively based on limited progenitors ignoring the original works. Presently there is a strong suggestion that the theory of efficient breach should be bought in Contract Law of China and the current system should be revised. The thesis means to analyze the theory of efficient breach objectively in the light of authorities and make accurate judgments.The first part of the article describes the bases and core of the theory of efficient breach. The bases contain economic and legal bases. The economic bases include Pareto improvement, Kaldor-Hicks efficiency and Coase Theorem. Pareto improvement and Kaldor-Hicks efficiency are the two standards to measure efficiency in economic theory. The former is less suited so that the concept of efficiency in the work is not the sense of Pareto improvement, most of Kaldor-Hicks efficiency which refers to a person who can compensate the loss of another person and there are surplus if the situation changes and gets better, then the overall effectiveness is improved. The second economic basis is Coase Theorem. Its essence is how to arrange the system (legal) and distribute rights efficiently, so that it can make the allocation of social resources optimal and maximize the wealth of social. One of the legal bases of the theory is that the remedy of damages is prior to specific performance. Another legal basis of the theory is that law is separated from morality. Holmes, an American scholar, pointed out that the parties of the contract didn't bear the obligation of performance in moral. He gave the party who broach with the right to choose, of which to make specific performance or to pay damages.This part also describes the core of the theory in detail. First, it introduce descriptions of the theory given by Peter Linzer, Richard A. Posner and Melvin A. Eisenberg, who made an important contribution to the theory. The description of Melvin A. Eisenberg contains the overbidder paradigm, loss paradigm and mitigation paradigm. The assumptions of the theory are that people are rational and efficient economic decision-makers, there is no difference between damages and performance, the remedy of damages is a universal applicable remedy for breach and the promiser knows about the promisee's loss caused by breach, in addition, also efficiency. Then this part makes use of diagrams to justify the theory which is divided into three types based on the above description.The second part summarizes the evaluation of academic for the theory of efficient breach and attempts to tell how to apprehend the theory. First, the supporters believe that it not only satisfies the personal interests, but also achieves the maximization of social wealth in economic. They also believe that it is possible to balance the general and individual justice. However, the opponents doubt with the bases of the theory. In their opinion, it is not easy to separate law from morality, the value of theory is single, and it is contrary to the theory of"contract choice". They also call the assumptions of the theory into question. They believe that the assumption of rational man is limited, there are differences between performance and damages, expected benefits can not be fully compensated and knowing the complete information of promisee is unrealistic. Opponents also challenge the consequences which the theory of efficient breach leads to. They believe that it undermines the confidence of clients in transactions and the result is not efficient and wastes resources. They consider that the theory is not efficient absolutely and prone to"efficient theft". Moreover, it will disrupt the order of the social seriously. Finally, we approve that the theory provides us with a new sight, but since there are so many defects that we don't approbate it.The third part proves that Contract Law of China rejects the theory of efficient breach. This section is divided into three levels to talk about. First, the theory of efficient breach does not hold and can't be achieved. Moreover, the lords in the USA never make use of the theory to judge. We can't accept that the 110th provision of Contract Law of China adopts the theory. Those backers don't realize the relationship between the act and the theory of efficient breach. The act of efficient breach is a kind of breach and widespread in countries. However, the theory of efficient breach is the theory that the scholars in Economic Analysis of law formed through deducing the related concepts and theory of law and economics on the phenomenon of efficient breach. The act of efficient breach existed earlier than the theory. When the theory of efficient breach came into being, the act of efficient breach had the meaning of the theory. At this point, we can not separate the two. In addition, there is no relation between paying damages and adopting the theory and the theory is not in conformity with the purpose and basic principle of the law of contract. At last, it is not accepted in the future. That is because the theory doesn't hold itself and apply our rule of law. Once we accept, it will bring crisis of confidence, then disrupt the order of social.The thesis reaches a conclusion that we should fully affirm current remedy for breach of contract in China and dispose the contract disputes on the basis of the privity of contract, instead of applying the theory of efficient breach stiffly. What's more, the Third Party Infringement of Contract could be relieved by the remedy of damages, according to tort law. In addition, legislative patterns and systems of other countries as well as juridical practice are recommendable reference to solve contract disputes of efficient breach.