Application Of Foreseability Rule In Judicial Practice

The foreseability rule is the common rule applied in limiting damage compensation in most countries. It is used to reduce the risk of the contracting parties and limit unreasonable compensation. In recent years, this rule is also established in China’s legislation and judicial interpretation, and it is deeply discussed in academic paper and books. However, very few people discuss it from the perspective of judicial practice. This paper will, on the basis of current theories, analyze the application of foreseeability rule in real cases in the light of judicial practice and offer suggestions for the problems in these cases.This paper falls into 3 chapters. In the first chapter, the author analyzes the legal basis of foreseeability rule in the light of its origin, constitution, and application in China. In the first section, the author, by comparing the legislation on foreseeability rule in France, Italy, Britain and USA and clarifying the main theories such as “intention theory” and “policy theory”, briefly studies the origin of foreseeability rule. The author believes that the principle of encouraging trade in “policy theory” can promote more agreements between two parties, facilitate the work of society, and better reflect the reason of foreseeability rule. In the second section, the author introduces the main theories on foreseeability rule. The theories on subject of foreseeability rule include “breaching party foreseeability theory”, “both parties foreseeability theory”, “compromise theory”, and the author believes that agreement between two parties determine higher mutual understanding than common people, that the breaching party knows the intent of contract and the interest that the other party desires and the possible consequence caused by breach of contract. Therefore, the author agrees with “breachting party foreseeability theory”. The theories on time of foreseeability include “time of contracting theory”, “time of breach theory” and “compromise theory”, and the author agrees with “time of contracting theory” in principle, but as for the breaching party with malicious intent, the time to foresee shall be set at the point of breaching. The theories on contents of foreseeability rule include “category theory”, “category + extent theory” and “compromise theory”, and the author believes that the contents of foreseeability shall include category and nature of damage as well as the specific situations at the time of contracting, but the specific extent and amount shall not be taken into consideration. In the third section, the author studies the theoretical application in China and the prospect interest in article 113 in Chinese Contract Law, and the rule of prospect interest, mitigation rule, counterbalance rule. The author also introduces the exception to foreseeability rule such as “fraudulent business”, “advanced agreement”, “physical injury”.In the second chapter, the author selects 7 typical cases on foreseeability rule and divides them into 6 categories which include: “harm caused by obligation”, “loss of interest in resale contract”, “loss of business profit”, “loss of inherent interest”, “loss of production interest”, and “loss of substituted interest”. In studying each case, the author, on the basis of current legal theory and rules, makes comments on the judgment and offer my own suggestions. By analyzing these cases, the author objectively reveals the current application of foreseeability rule in China’s judicial practice. Meanwhile, it also lays the practical foundation for the arguments in this paper, making the conclusion more convincing.In the third chapter, the author combines the theoretical study and the comments on cases in the first two chapters and classified its application in various categories, hoping to make a reference for future litigation. However, the author also finds some defects in the application of specific rule in practice: Firstly, lack of uniformity in legal rule and concept of foreseeability rule causes confusing application of this rule, resulting in obstacles both in theory and practice. If legislators integrate several laws on lack of rules on foreseeability rule and make clear legal concept, it will not only clarify its application, but also avoid the possible conflict in these laws. Secondly, lack of rules on determining breach makes it impossible to impose more severe sanctions on malicious breaching party and reduce the protection of non-breaching party. By introducing negligence rule and corresponding rule of burden of proof, we can apply foreseeability rule more reasonably. Thirdly, lack of non-breaching parties’ obligation to disclose information makes it hard to develop a custom of mutual notice. As a result, the conflict has to be settled by complex litigation procedures, reducing trade efficiency. The establishment of this obligation can simplify the process to determine foreseeability, clarify the performance of contract and make the judgment have a legal basis. Finally, because foreseeability rule is abstract and subjective, together with the above defects, judges possess too much discretion in dealing with these cases, and often cause the unusual situation of “different judgment in similar cases”. Therefore, it is necessary to make some judicial guidelines to limit discretion by correcting these theoretical defects. At the same time, we need to strengthen education of judges, maintain the authority of law and enhance the parties’ confidence in trade.