On The Application Of Principle Of Change Of Circumstances

“Agreement must be strictly abide” is an old principle. It requires the parties ofthe contract perform strictly according to the contract to fulfill the contract, and itshows the binding effect of contract to parties. But when the objective circumstanceschange, to continue the contract must be unnecessary or unfair. If we stick to thebinding of the contract,it will damage one party’s interests or even both parties’, andalso affect the legal concepts of fairness and justice advesely. So we need anexception to the rule, and the principle of change of circumstances is such anexception. Although the principle of change of circumstances has been in existencefor a long time in theoretical circles, but it hasn’t been recognized by our legislationscince2009when the Supreme People’s Court recognized it by way of JudicialInterpretation (II) of Contract Law. However, there are still some problems with theapplication of the principle, especially in the backdrop of the current national realestate policies, more and more housing contract dispute arise, which led to ancontroversy that wether the real estate policies constitute a change of circumstances.Based on the above considerations, this paper will analyze domestic and internationaltheory and legislation of the change of circumstances, and analyze the applications ofthe change of circumstances with actual case,and try to sought the solution to theabove problems.The thesis is divided into four chapters. Chapter one discusses the basic theory of the principle of change of circumstances. It first define the concept of the change ofcircumstances, including frustrated system and transaction basis obstacle system; thenit analyzes the main theoretical basis of the principle of change of circumstances; andfinally it elaborates legislative evolution of the change of circumstances.Chapter two analyzes the conditions of the application of principle of change ofcircumstances, including: must have a fact about change of circumstances; change ofcircumstances must occur after the founding of the contract, before it fulfilled; changeof circumstances must be unexpected; change of circumstances should not beattributable to the parties; after the change of circumstances, maintaine the originalcontract is of unconscionability. It also analyzes the different applicable conditionsbetween the frustrated system and transaction basis obstacle system.Chapter three explains the legal effects of change of circumstances. It includesre-negotiate obligations, change the contract and rescind the contract. And these threeeffects apply in order.Chapter four is about the practical problems of the application of principle ofchange of Circumstances. First, propose two cases arise from real estate policies andanalyze them; second, describe the distinctions among the change of circumstances,force majeure and commercial risks. Finally, explore other issues encountered inpractice, including discretion, rules of procedure and whether to formulate a standardof change of Circumstances.