Regulation Of The Opportunism In The Contract Law

The concept of opportunistic behavior is originally derive from and mainly used byeconomics and management fields. Without any exception, such opportunisticbehavior which is actually roots in human’s nature also exists in many civil andcommercial contracts which are based on and for the purpose of transactions. As atool for autonomy of private law, there are abundant constructive norms in theContract Law. The limited presentations of the contract itself as well as the vastconstructive norms provide much freedom to the parties, so that some opportunisticbehavior become more obscure and difficult to be discriminated.the cause, the manifestation form and the necessity of the Regulation of theopportunism in the contractual relationships are first specified in this article in orderto introduce the background of the opportunism. Secondly, the opportunisticbehavior is initially divided according to two major stages of contracts, namely thenegotiation stage (inexistence of a written contract) and the performance stage,which is after the contract establishment. For the secondary division, the commonopportunistic behavior existing in the performance stage can be summarized as“obvious” and “obscure” opportunism, thus to analyze those opportunistic behaviorin different stages and has different characteristics. Subsequently, when discussingthe Regulation measures for the opportunism, this article is mainly focuse on threeaspects: the Regulation system of market, the prevention system of contract text andterms, the correction system of the judicial intervention in contractual relationships.On the one hand, Those three systems are applied in a certain order in practice andon the other hand,they can make up for each other functionally. Consequently, itpresents gradually progressive but mutually interacted relationships. In this part, thisarticle mainly compares two distinctively methods in contract interpretation----theliteral interpretation and the business practice interpretation by their roles in thejudicial correction process of opportunistic behavior. Finally, the possible solutionsand the standards which should be followed during the process of handling the opportunism are given in the conclusion.The opportunistic behavior in the contractual relationship roots in theself-interest essence of the subject itself and breeds in the asymmetry information oftransactions and the incomplete contracts, the cost-benefit ratio is the inducement.Only when the opportunism is controlled, the contract parties can cooperate toachieve the win-win goal as well as reduce the transaction expense to increase thesocial wealth. However, the opportunistic behavior has different characteristics indifferent contract stages: in the negotiation stage, there is no formal contract toregulate the negotiation relationship between the parties concerned, and one partycan easily become the victim of the opportunistic behavior of the other party becauseof it’s precontractual transaction specific assets; in the performance stage, one partynot only can take the advantage position to revise the contract (“obvious”opportunistic behavior), but also can make use of the incomplete contract to deviatefrom the transaction purpose (“obscure” opportunistic behavior) to illegally transferthe wealth from the other party. Mutual Cohesion and coordination of the freemarket, contract text, judicial decision in the process of goverance of theopportunistic behavior: Regulations from the free market such as business reputationsanction and commercial alliance are the spontaneous governing measures in thetransaction process; although such Regulations are good for maintaining bussinessrelationships, yet the effect is usually limited by the objective conditions, not widelyapplicable. contract texts and clauses such as industrial standard terms and defaultclause can govern opportunism behaviors at a low cost, but the limitation of wordsand the unpredictability of the future make the written contract unable to respond toall the changeable opportunistic risks. The judicial intervention through the publicpower has the obvious and fast effect, but such Regulation mode may easily causeimproper intervention in the autonomy of private law order in the contract, so thejudge should, during the decision process, not only clearly understand and respectthe true intention of both parties, but also pay serious attention to the use of specificrules. When dealing with the “obscure” opportunistic behavior, it is necessary to paymore attention to some objective evidences such as unpredictable objective changeand alternative solutions to assist the judge’s discretional evaluation of evidence; when judging the “obscure” opportunistic behavior, it is necessary to use thebusiness practice interpretation method to make up for the weakness of the literalcontract interpretation. finally, requiring the defaulter to hand over the illegal gainsfrom its opportunistic beach of contract as a disgorgement remedy is favorable forrealizing corrective justice and deterrent effect.