A Study On Issues Of Contract Cancellation By Breaching Party

Whether the breaching party has the right to terminate contract has always been perplexed in theoretical and judicial cycle.This paper focuses on two cases that the breaching party prosecutes to terminate the contract.Through the comparative analysis of these cases,we will discuss three issues as followed.First,whether the breaching party has the right to terminate the contract under existing legal system;Secondly,what is the authority and function of the Court in the case of dispute settlement;Finally,whether the court should support the right of the breaching party to terminate the contract.The right that produces legal effect of the rescission of contracts only by one party is the right to terminate the contract.The function of the court is to only confirm the effectiveness of the rescission of contracts by one party,and to make sure contracts have been terminated when inform the other party.The court is able to adjudicate contracts by force only when there is changes of circumstances.In current legal system,the legal basis for the termination of contracts are only included by Article 93,94,110 of the Contract law and the appearance of circumstances change.By a systematic analysis of China's contract cancellation system,the author concludes that,the breaching party does not own the right of contracts rescission under Article 94(2)-(4)of the Contract Law,regardless logical point of view or by law.The right of rescission of contracts can be owned by the breaching party,only in the following three conditions:(1)the termination of contracts occurs under the exact situation that described in the contract;(2)force majeure occurs which is strong enough to affect the achievement of the contract;(3)the situation occurs which is designed by Article 110 of the Contract law.In the case of the change of circumstances,the breaching party does not own the right to terminate the contract.However,based on the objective circumstances of the change,the contract can be terminated by the court.By reviewing the design concept behind current system of contract cancellation in China,the author believes that our country follows the tradition civil law system,which emphasizes the principle of commitment to contracts,honesty and credit.Contracts can not be relieved unconditionally.Although this idea is worthy of praise and upholding,due to the complication and evolution of the social environment,people are confined to the restriction between bounded rationality and asymmetry information.The breaching party wants to terminate the contract because of reasons other than the statutory requirements,such as the initial purpose of the contract is not able to achieve.Contract continuance will cause huge loss to the breaching party.If the existing legal system can not allow the breaching party to escape from the contract,the consequence of mandatory performance is not yet known,and it will cause unconscionable to the breaching party.Therefore there is a need to help the breaching party regarding contracts termination.The author believes that solving this problem needs to be based on the consistence of current legal concept.It should support the breaching party to terminate contracts in certain situations.Meanwhile,it should imitate the process method of the change of situation to perform judicial interpretation by the Supreme Court and termination of contract by the court.The author supports breach of contract from a moral point of view.When the purpose of the contract can not be achieved due to special circumstances,it should not force the breaching party to fulfill the contract obligations.As long as the interests of the observant party can be compensated,the court has the right to make decision to terminate contracts.