Calculative Issue Of Compensation For Breach Of Contract

Compensation has been the most common way of remedy for breach of contract. The calculative issue in compensation rule for damages is quite important in legal study as it relates to whether victims in breach of contract get fair compensation in terms of their loss, thus bears significant value in both theoretical and practical area.This article firstly makes a short introduction of the real intention of compensation rule for damages. The intention is to cover the loss resulted in breach of contract, and the scope of such compensation should not across the line of total loss. Therefore, vindictive damages shall be prohibited without written regulation of law. Calculation of compensation for breach of contract is a both legal and factual issue. Up to now, the legal system concerning this issue in China is too simple and need to be improved.Concerning the object of compensation for breach of contract, this article then sort out the relationship between interests and damages in the framework of compensation rule for breach of contract. Interests and damages in this research area are not equal. Study of interests, usually in abstract ways, helps us to find the reason and foundation of compensation, in other words, the goal and legitimacy of compensation, whereas study of damages leads to more specific conclusions such as certain kinds of compensation for damages occurred in a specific case, which are direct basis for calculation. The study in the interests aspect is to clarify the theoretical foundation of calculative issue of compensation for damages, while the study in damages aspect concerns with practical techniques in this issue.Then the writer compares American legal system with Chinese law in the aspect of protection of interests in contract. The U.S. Law divided contract interests into three parts:the restitution interest, the reliance interest, and the expectation interest. Chinese jurisprudence lacks such distinction. Some scholars hold the view that Chinese Contract Law Article113indicates that compensation for breach of contract is based on two concepts:interests gained and loss suffered. Such approach adds interests as well as damages together in calculation of compensation without systematically discrimination of expectation interest and performance interest, thus it sometimes cause confusions in designation of compensation rule.The United States designs the framework of compensation rule for breach of contract through the Uniformed Commercial Code, the Restatement, state laws, and common law cases by calculation rules and classic precedents. In China, on the contrary, similar regulation could only be seen in a few articles in the General Rule of Civil Law and the Contract Law that are meaningless in practical sense. The inherent reason for such difference is that operation of meticulous calculation rule in the U.S. relys on high cost litigation mode, for instance, legal precedents and the jury system, whereas similar legal system could hardly be found in China. Nevertheless, the core interest of compensation for breach of contract is the same. As the process of globalization and unification of commercial law goes on, it would be necessary for Chinese legislators to improve the calculation rule of compensation,taking the U.S. Laws as reference.The last part of this article makes effort to design preliminary Chinese rules in the area of compensation for breach of contract especially in two aspects:the approach of calculation and the principle of calculation. Victims could choose subjective or objective way of calculation for better remedy, but such privilege shall be limited. Moreover, compared with the U.S. Law, principles of calculation for different kinds of damages should be clarified in written law so that victims could ask for appropriate compensation. Limitation of compensation like the foreseeability, the fault offset, and the loss offset regulations should also be adequate. Judges should pay attention to other details such as different subject as well as subjectivefault.