A Study On The Rescission Of Contract By The Default Ing Party

The traditional theory of contract law believe that the rescission right of contract belongs to the observant party. However, In the case “ Xinyu Co. v. Feng Yumei ”, the court supported the defaulting party’s claim of terminating the contract which is different from the traditional theory. There is no professional paper for this issue in China, so this is why I write this thesis. Reviewing the case and the judgment, Although the judgment allows the defaulting party to terminate the contract, but the nature and scope of the right is not clear. The provisions of Article 94 of the legal rescission right is right of formation and the rescission of contract under rebus sic stantibus is gestaltungsrecht. According to the reason of rescinding contract by defaulting party, the nature of this right is gestaltungsrecht or right of claim. For the scope of this right, we firstly exclude force majeure and rebus sic stantibus and secondly exclude special agreements of the parties.The legitimacy and rationality of the right of rescinding contract by the defaulting party demonstrates from the three angles: the judicial practice, the theory and the legal interpretation. For the judicial practice, this thesis makes an empirical study on the relevant cases of database retrieval by two parts: for the one part, this thesis draw the conclusion about the causes of rescission of the contract, the court’s judgment and the law application through the statistics and analysis of relevant cases; for the other part, through the cases of the court’s support for the defaulting party, we concludes the four legitimate reasons that the judicial adjudication supports. For the theory of contract, this thesis has three angles. First, the purpose of the contract termination system in order to enable the parties to get rid of the contract in a timely manner instead of the function of punishing the defaulting party. Second, allowing the party to terminate the contract has also been supported by Efficient Breach theory, including theory of the Distinction of Law and Morals, Contract Choice theory, Social Cost theory and so on. Third, comparison of actual performance and compensatory damage, compensatory damage has obvious advantages. For the legal interpretation, there are three kinds of views understanding of Article 110 of the "contract law" : the first view states that it belongs to the liability for breach of contract which has nothing to do with the rescission of contract; the second view believes that this article can give the right of rescinding contract by the defaulting party; the third point views that this article can only be used as a defense by the defaulting party. In all, the second view is most reasonable. For the specific application of this article, How to judge the "higher cost of performance" is an important issue. After demonstrating the legitimacy and rationality of the rescission of contract by the defaulting party, the conditions of the rescission of contract by the defaulting party are analyzed, mainly including physical conditions and procedural conditions. The rescission of contract by defaulting party must be satisfied with specific physical conditions and procedural conditions. The conclusion.is: in the condition that the performance of the contract can not be or the cost is too high and in the condition that compensatory damage is sufficient for the observant party, the defaulting party have the legitimacy and rationality to rescind the contract.