On The Identification Of Attainable Interest In Breach Of Contract

Although Chinese contract law and relevant judicial interpretations provide that theattainable interest in breach of contract should be compensated, but it is controversial toidentify the scope of compensation and calculate the damages in judicial practice. Therefore,this paper is to discuss the attainable interest in breach of contract for providing help tojudicial practice.In addition to the introduction, the text is divided into three parts. The first part discussesthe conception, characteristics and the guiding principles of the attainable interest. Thecompensation of damages in breach of contract should include two parts: First, the decreaseof property and the increase of the cost caused by the breach of contract; another part is theinterests expected by the right owner if the contract is fulfilled. The former is usually referredto as the loss suffered, the latter known as the lost profits. The main characteristics of theattainable interest include: hypothetical, relative certainty, property, and the value-added. Thepurpose of rule of the attainable interest is to fill the damage, and promote efficiency and thegeneral guiding principle is entire compensation. Due to the fact that link of causality can beextended unlimitedly, most countries take certain measures or standards to constrict causality.This paper also introduces the economic analysis to guide the identification of attainableinterest in breach of contract by efficiency.The second part discusses the rules of identification of scope of attainable interest. In thebasic rule of the identification, the author analyses foreseeability rule and compare it withcorrespondence theory of causal relationship by using the method of law and economics andpoints out the deficiencies of China law in predicting time and risk distribution. In other rulesof the identification, the author also discusses the rule of fault liability, the rule of mitigatingthe damage, the rule of gains offset the losses by using the method of law and economics toprovide suggestions of improvements of efficiency and demonstrate the rationality of therules.Finally, the author offers suggestions to the identification rules from the view oflegislation and judicial interpretation, first, when we modify contract law in the future, we canconsider that the compensation of malicious defaulting party do not restricted by theforeseeable scope of the contracting, From the point of the interpretation, due to the lack of the theory, the foreseeable content should require rather general types than specific amountand it can be extended the scope of attainable interest for malicious defaulting party to protectthe interest of the non-defaulting party. Second, the foreseeability rule does not apply in thecase of the defaulting party who did not receive the consideration of the risk or received therisk that is far greater than the income, even if the defaulting part was informed of the specialrisk. In the judicial interpretation, when the consideration vastly disproportionate to the risk,the scope of foreseeability should be limited to the general risk.The third part discusses the calculation method of attainable interest of breach ofcontract. Calculation method includes concrete assessment and abstract assessment. Bothparties should predict market risk, and consider it when they entered into a contract involvingthe selection of the calculation method, so the normal fluctuations in the market price can bepredicted, but for abnormal fluctuations in the market price, you need to consider theforeseeability of the risk. When there is no market price or market price cannot compensatethe loss, we should consider the concrete assessment. This paper also proposes marketreplacement method, historical method, industry standard method, comparative method,discounted cash flow method to prove the attainable interest in breach of contract.