Study On The Applicable Rules Of Reliance Interest In Breach Of Contract Damages

The reliance interest principle was originated in the judicial practice in common law countries.The introducing of this principle has laid the foundation for the break of the classical contract law.In classical contract law,principle of will was the only effectiveness basis of contract.But reliance interest principle has also played an important role in the development of the modern contract law.The disputes and chaos about reliance interest on the concepts,natures,ranges exist both in common law system and civil law system.In China,the reliance interest principle can only be seen in the academic research and be applied in some judicial practice.Besides,China does not give legal recognition to reliance interest in the liability for breach of contract.This essay tries to discuss about the disputes of reliance interest and provide personal constructive legislative proposals.This essay is divided into four parts:In the first part discusses the connation of reliance interest.There are three main viewpoints on it,which are the “loss doctrine”,“interest doctrine” and “situation change doctrine”.After comparing and researching the three main doctrines and the comprehensive consideration of the aim of proposing reliance interest,the scope of reliance interest and the reason of proposing reliance interest,the writer form her own opinion,that is,reliance interest is the necessary expenses and abandoning trading opportunities,which made by the party who trust the opposite party reasonably,intending to get or make better use of the fulfilling interest.Then,in order to acquire a better understanding of the concept of reliance interest,I study the difference and therelationship between reliance interest,restitution interest and expectation interest which were put forward by Fuller.When the three interests are integrated into a dynamic trading process,we can find that reliance interest and restitution interest are part of inherent interest,and the reason why the party is willing to pay inherent interest is that the party want to obtain expectation interest.So we come to the conclusion that the interest in contract is composed of expectation interest and inherent interest which includes reliance interest and restitution.The second part studies the protection rule of reliance interest in the liability for breach of contract in other countries in the world.I study the history of reliance interest principle and the new vitality of reliance interest in modern contract law system especially in America and German.In common law,we find that reliance interest is admitted both before and after the establishment of contract.Whether the contract is valid or not,reliance interest is protected in Anglo American Law.In Anglo-American Law System,reliance(Promissory Estoppel)and doctrine of consideration are the two most important foundation of validity of contract.Both of them exist side by side for a long time and complement each other in order to protect the contract parties.While in civil law system especially in German Law,reliance interest is only recognized by law in culpa in contrahendo.When the contract is set up and valid,reliance interest is not recognized.As a civil law country,China follows the rule that our Contract Law protects reliance interest mainly in culpa in contrahendo and protects performance interest mainly in the liability for breach of contract.The reason why reliance interest is not recognized by law when the contract is set up and valid is that German Law think that the protection of performance interest(expectation interest)includes the protection of reliance interest.So it is unnecessary to provide protection to reliance interest alone.But now,more and more legal scholars do not agree to the viewpoint.In the third part,I study the application of protection of reliance interest.I discuss about the most two important and controversial issues related to reliance interest.That is: whether reliance interest is limited in the area beyond performance interest,the application order of reliance interest and performance interest.Firstly,I think that reliance interest should not be limited in the area of performance interest.Instead,we should have a comprehensive consideration of subjective fault and imputation of the contracting party as well as the reasonability of expenses paid by the and imputation of the non-breaching party.Secondly,compensation of reliance interest andperformance interest should not be applied at the same time unless the non-breaching party pay the expenses for further taking the advantage of the subject matter.In addition,only when performance interest is hard to be proved does the protection of reliance interest is needed in the liability for breach of contract.In the fourth part,I study the present situation of our Contract Law about protecting reliance interest in the liability for breach of contract and put forward legislative proposals.First of all,as a civil law country,China follows German and protects reliance interest mainly in culpa in contrahendo.That is,the party concerned,who disobeys precontractual obligations on purpose or by mistake before the contract goes into effect and results in the failure,effectiveness,change and cancellation of the contract,will take liability for culpa in contrahendo.But China does not give legal recognition to reliance interest in the liability for breach of contract.Compared to Anglo American Law and German Law,the provisions of the existing laws and regulations is relatively ambiguous in scope of damages for breach of contract in China.Therefore,I suggest that China have specific stipulations on protecting reliance interest in the liability for breach of contract.There are two legislative models that we can learn from.We can learn from the protection rules of reliance interest in Anglo American Law and in German Law.In addition,I suggest that China establish the legal principle of reliance interest and rule the constitutive requirements of damages of reliance interest,the extent of damages of reliance interest and its limitations by passing a law.The extent of damages of reliance interest should include the necessary expenses and abandoning of the trading opportunity occurred before and after the establishment of the contract,that is to say,we should protect the contract benefit before and after performance.