Contracts With Protective Effects Towards Third Parties

According to the theory of contract relativity,the contractual effect only binds the parties of the contract.“Contracts with protective effects towards third parties”,which created by the Germany courts and academic development,breaks the relativity principle of contract.If a third party has a particular contractual relationship with the debtor,the obligation of protect from the contract will be extended to that third party.When the debtor breaches the contractual obligation,which causes the damages of the third party,the latter may claim the right of indemnification under the contractual law towards the debtor.In the course of conclusion and performance of the contract,both parties should carefully conduct in transactions and other social interactions with the principle “bona fide doctrine”,namely the principle of good faith.And they should also avoid making improper damage within parties and the influence scope of social effects of the contract.“Contracts with protective effects towards third parties” developed on the basis of the social effectiveness of the contract and the principle of good faith.Consequently,the contractual protective obligation has its inherent legitimacy when extended to the third party.The German courts first applied this concept to cases of personal injury with contracts such as lease and work.As for the justification of the legitimacy of the theory of the expansion of the contractual protective obligation,the Reichsgericht initially used a broad interpretation of the contract(Article 157 of the German Civil Code)to make the direct application or analogous application of “Contracts in favor of third parties”(Vertrag zugunsten Dritter,Article 328 of the German Civil Code).However,the scholars have strongly criticized this practice.Under the influence of the Professor Larenz the new notion“Contracts with protective effects towards third parties” was increasingly separated from the traditional Vertrag zugunsten Dritter and becomes the dominant theory.The theory is that,in general,the expansion of the contractual protective obligation to a particular third party doesnot originate from the parties' consultation(which is also possible in the individual case),nor from the supplementary interpretation of the contract(Article 133,Article 157 of the German Civil Code),but a supplement to the parties' consultations based on the more amorphous idea of good faith contained in Article 242 of the German Civil Code.And such cases need to be regularized by the courts.Practice gradually accepted this point of view,and no longer applies“Contracts in favor of third parties”.Courts make use of “Contracts with protective effects towards third parties” to demonstrate the expansion of contractual obligations of protection.With the development of case law,the court also applies the theory of “Contracts with protective effects towards third parties” to pure economic loss and pre-contract cases.However,even without justifying the expansion of the obligation of contractual protection,which applies Article 328,the legal basis for “Contracts with protective effects towards third parties” to different types of cases is still difficult to be consistent in the cases.For the courts,however,this is a non-problem.What they are concerned with is doing justice to each case.The Federal Supreme Court now either directly on the basis of the principle of good faith in Article 242,or with the principle of good faith,based on the supplementary interpretation of the contract(Article 133,Article 157),presumes the parties to have intention to protect the third person,or applies this theory based on Article 241,paragraph 2 and Article 311,paragraph 2 or paragraph 3.However,no matter what the basis of the right of claim,the essence is based on the principle of good faith.It is generally accepted in the doctrine that,“regularization by the courts under the principle of good faith” can make a reasonable and unified explanation of the application of the “Contracts with protective effects towards third parties” in various cases.After demonstrating the legitimacy of the “Contracts with protective effects towards third parties”,this article reviews the tort law and the contract law in China.The tort law in China can solve the cases of pure economic loss caused by negligence and the employer's responsibility.The limitation period of personal damages claims is consistent with the general prescription of litigation.So in China,the third parties have legal means to remedy their damages,instead of using expansion of contractual protective obligations.However,in my opinion,the expansion of contractual protective obligations to a specific third-person theory has its value in our country,which is reflected in:1.If cases of pure economic loss are always solved by the tort law,this may lead to an overly broad interpretation of the duty of care in tort.2.If the debtor also takes the liability for tort to the third party,the third party may through the concurrence of the tort claim for damages and the contractual claim for damages,has the right to choose either claim to make the damage more likely satisfactorily remedied and fairness and justice are substantially achieved.Based on the principle of good faith,the theory of the obligation of contract protection to be extended to a specific third party is in conformity with the concept of fairness,justice and victim protection.It has inherent legitimacy.The contract law in China expressly stipulates the principle of good faith and the secondary obligations in all phases of the contract,so the existence of the obligations of contract protection is admitted by law.Therefore,the“Contracts with protective effects towards third parties” also has its legal basis in our country.The maintenance of contractual defenses is a matter of how to apply “Contracts with protective effects towards third parties”.If the contractual liability law is applied to solve the legal relationship between the debtor and the third party,the debtor is in principle entitled to claim his legal status and the contractual rights from the original contract to the third party.Namely,the debtor also has the right to demur towards the third party,who armed with the obligation of contractual protection,with the defense from the original contract.Particularly it is significant on the two issues: the parties' agreement to limit or exclude their liability to third parties and the third party's liability for fault of creditors.The maintenance of contract defense is conducive to the protection of the debtor's rights,and conforms to the requirements of litigation economy and litigation efficiency,thus can achieve fairness and justice to a greater extent.When the “Contracts with protective effects towards third parties” is applied,in order to control the contractual responsibility and the scope of breach of the relativity of the contract,and to avoid confusing the application of the contract law and tort law,the scope of the third party,which need contractual protection,is defined by four elements,including the proximity of performance,the interests of creditors,the foreseeability of debtors,necessity of the protection of the third party.