Liquidated Damages Foreseeability Principle Study

The rule of foreseeability is provided in the civil laws or contract laws in many countries, as one of the important tests for limitation on compensation for breach in contract. In this article, the author introduces various comments on functions and theories of the rule, and thinks that the rule of foreseeability is a policy tool to facilitate information exchange, fairness and efficiency. There are both distinctions and relations between foreseeability and remoteness, causation, foreseeability in torts. The rule of foreseeability is applied to determine the scope of damages for breach, but not applied in nonperformance, such as void contract, voidable contract and negotiation in bad faith during making contract due to one party's fault. The rule also apply to willful breach, but the time to foresee should shift from contracting to breaching in order to realize 'efficiency breach'. When parties have agreed with liquidated damages in contract, or disposed of their substantive rights, the rule doesn't apply. The rule of foreseeability is a whole set of rules including the subject, the time, the standard, the extent and the content to foresee. The elements to determine whether damages are foreseeable mainly include the identity of and relationship between the parties to contract, and types of goods. There should be at least three exceptions to the rule, that is disproportion between risks and benefits, fraudulent behavior, and dangerous contract. Art.113 on foreseeability in Chinese Contract Law is advanced, but its defect is that the provision doesn't exclude the application of foreseeability from disproportion between risks and benefits.