Right Disposition And Validity Of The Contract

Unauthorized disposition (Entgeltliche Verfugung eines Nichtberechtigten) is referring to disposition of property of others by unauthorized person in the name of himself. It often takes the form of contract in which property of others have been disposed without owner's consent. Three sides are involved in the legal relationship caused by unauthorized disposition. Due to different understandings of disposition, the meaning of unauthorized disposition varies from country to country. In Germany and Taiwan, disposition is different from contract and unauthorized disposition falls into the category of juristic act of right in rem. However, French, Swiss and Japanese law treat unauthorized disposition as contract of transferring property. In Chinese civil law, unauthorized disposition is referring to contract committed to transferring ownership of property. Therefore, the legal effects of juristic act of right in rem and contract can be separated and have different rules. Entering into a contract does not directly cause the transfer of ownership, thus the real right holder's interests being fully protected. On the other hand, the validity of contract is not decided by the fact whether the disposer has the required legal capacity. The legal capacity of disposer can only affect the performance of contract and the effect of transferring ownership. If the real right holder does not recognize the disposition or the unauthorized disposer cannot be awarded the required capacity after entering into the contract, the disposer should pay the contract. Article 51 of Chinese Contract law, which takes unauthorized disposition as revocable contract, deserves critical examination. This content of this article comes from Article 1599, French Civil Law and German and Taiwanese Civil Law, simply putting invalid theory and revocable theory together. It does not seem to be the product of close reasoning and has no scientific foundation in legal theory. Moreover, article 51 does not fit into the civil law system smoothly, for it conflicts with the institution of bona fide possession. It is obvious that the current law of unauthorized disposition cannot provide security for exchanges and is not conducive to encouraging business activities. It goes against the basic principle of justice in civil law and ignores the lawful interests of the other contractual party. The comparative studies of legal regulations of unauthorized disposition in other jurisdictions reveal that the majority of countries have recognized the validity of contract involving unauthorized disposition. As we know, market economy is based on rule of law. The purpose of legislations is to promote the economic development and stimulate business activities. Bearing this in mind, we should admit the validity of contract involving unauthorized disposition while keeping the effect of transferring ownership revocable. This attitude will meet the demands of market economy and leave more room to the application of the institution of bona fide possession. It also tallies with current civil law system.