Research On The Arbitrary Right Of Rescission In China's Contract Law

As an important special statutory termination right, the right of termination without any reason coexists with the general statutory termination right in the contract termination system. Apart from the Article 268 and Article 410 in Chinese Contract Law, stipulating the termination right for the work contract and mandate contract respectively, Article 186 regulates the revocation right of the donor, of which the essence is the right of termination without any reason. Non-term lease, or storage contract and warehousing contract without special period, the parties’ right to terminate the contract at any time also belongs to the right of termination without any reason. In addition, according to the provisions of contract law, the consignor of the carriage contract, and the depositor of fixed term storage contract and warehousing contract, also enjoy the right of termination without any reason. The right of termination without any reason is based on the nature of special type of contracts and the position of the party or parties. Exercising the right of termination without any reason and general statutory right of termination can achieve the equal effect of terminating the contract, but as for the distribution of liability, they are obviously different, and examining the general statutory right of termination at first can contribute to the correct determination of the rights and obligations between the parties.The Contract Law provides clear restrictions on the donors and consignors’ right of termination without any reason; for the fixed term warehousing contract, the law restraining if the depositor retrieve the goods in advance, the warehousing fee shall not be reduced, which may be applicable for the fixed term onerous storage contract. However, there is no restriction on the same right of the ordering party in the work contract or the parties of the mandate contract. With the increasing demand of the trade stability in modern society, as well as the widely using of the principle of good faith, the rules of terminating contract without any reason resulting from a free economic system needs reasonable limitation. The ordering party may terminate the contract without any reason only before the completion of the work; the right of the principal shall subject to ‘agent interests’ and good faith principal. Construction contract and commission contract are provided for the analogy application of the provisions of work contract and mandate contract respectively in case of legal loophole, but such analogy should not extend to the right of termination without any reason, since the right can affect the contractual relationship significantly.In order to increase the stability of the contractual relationship in practice, the parties tend to agree to waive the right of termination without any reason, such a provision in a contract free of charege is invalid, e.g. unpaid mandate contract. The unpaid contract is based on the mutual assent, one party is willing to do a favor for the other party, and the parties may terminate the contract freely without violation of good faith. In onerous contract, like word contract or paid mandate contract, the agreement of giving up or limiting the right of termination without any reason shall be valid. The law gives the party the right to terminate contract just to make it easier for them to free themselves from a particular contractual relationship, as the stipulation is unrelated to the public interests directly, and this stipulation should be regarded as optional rules and could be excluded by the parties through a special agreement. On the other hand, if the parties agree to establish the right of termination without any reason in a contract, on the basis of their own rational judgment, such agreement is a self-selection and different from the analogy application, which is universal, and belongs to the agreement cancellation, and shall be valid.The exercise of the right will terminate the contract from then on, and if leading to the loss of the other party, without exemptions, the party should be liable for damages. If the consignor of the carriage contract, and depositor of the fixed term storage contract and warehousing contract, exercise the right and terminate the contract, the transportation fee and warehousing fee shall not be reduced, which means they have to pay the expectation benefits to the non-breaching party. If the ordering party exercise the right, he has to give the payment of the completed part and compensate the expectation benefits of the unfinished portion, but the principle of offsetting gains and losses may be applicable and minus the expenditure saved because of the termination and the potential profits. In the unpaid mandate contract, if the agent terminate the contract in the adverse situation for the principal, he may compensate the reliance loss of the principal. If the parties in a paid mandate contract agree to waive the right, then he terminates the contract without any reason, his performance constitutes a breach of contract, and he shall bear the damages; if exercising the right maliciously and resulting in the violation of good faith, the party also shall compensate the expectation benefits; if the principal terminate the contract under normal circumstances, he can pay the loss of the agent reference to the liabitiy of the ordering party, while the agent is required to pay the reliance loss, such as the expenditure of entrusting again, of the principal for terminating the contract.