The Preliminary Contract And Its Effectiveness

The traditional contract model of offering-acceptance emerged in the period of free capitalism in 17 th to 18 th centuries.At that time,the transaction model between market subjects was relatively single,and the market division of labor and dependence was also simple.With the development of commodity economy,market transaction is more and more complex,the level of market division of labor is becoming more and more complicated,the transaction subject to enter into a contract,often need to carry out repeated in-depth consultations,so the preliminary contract came into being.Preliminary contract is a concept corresponding to the final contract,which means a contract to formally enter into a certain contract in the future.The validity analysis of preliminary contract includes two aspects,on the one hand,it clarifies the obligation of performance that the parties to the appointment should bear,and on the other hand,it determines the liability for breach of contract that the parties should assume when they breach their obligations.As for the effectiveness,the Supreme Court has recognized in 2012,but it neither referred to the specific way to fulfill the obligation of the preliminary contract nor assumed the liability for breach of contract.At the same time,in practical trials,the Supreme Court has published 5cases,but these cases are not consistent in judgment views on the binding force of preliminary contract and the legal remedy for breach of it.Based on this,the paper will expound the theory,then introduce practical cases and the provisions of comparative law and focus on the analysis of its effectiveness.In order to study the effectiveness of preliminary contract,its contractual nature should be recognized first.Only in this way can the performance obligations of the parties and the liabilities for breach of contract be specifically analyzed.No matter from the origin or the definition,the nature of the preliminary contract is undoubtedly a contract.But in modern times,the debate about the nature of appointments has been rife.After the theoretical transformation of German and Italian jurists,the contractual nature of the appointment was basically recognized.German scholars introduced the legal act system to interpret the system of sale and purchase preliminary contract in the French civil code.Preliminary contract,as the result of expression of intention,is a typical legal act of both parties,namely,contract.In the Anglo-American law,the traditional Anglo-American law also once refused to recognize the contractual nature of the preliminary contract,until in the case of Itek Corp.v.Chicago Aerial Industries,Inc..In order to explore the binding force and liability for breaching,it is necessary to confirm that the preliminary contract has been concluded and taken effect.In addition to the general requirements for the formation and entry into force of this contract,the preliminary contract has its particularity in the conclusion of the requirements,which can be summarized as four aspects: binding meaning,content certainty,form requirements and approval requirements.The first two are general requirements and the last two are special requirements.The so-called binding meaning means that the parties are binding and voluntarily undertake the obligations arising from the conclusion of this contract.The feeling of being bound is the consent of the constraint,which is a necessary prerequisite for its establishment.If there is no such consent between the parties,it will not be determined naturally.The lack of certainty of the content will affect the validity of the contract.For the parties,if the content of the contract itself is not specific and clear,then the contract also lacks finality,it is difficult to infer whether the parties are willing to be bound.However,even if certain core clauses are flawed,the preliminary contract can be concluded by contract interpretation to infer the meaning of the parties.After all,the meaning of restraint dominates between content certainty and binding meaning.As for the formal request,since the preliminary contract and the contract are independent of each other,the content does not necessarily contain the main content of the contract,so that the parties can make it,and the legal requirements of the contract form cannot be applied to the preliminary contract surely.For the preliminary contract,in principle,there is no special form,the parties have the agreement surely from the agreement,if there is no agreement,whether the form be compulsory should be based on whether this contract is considered to be the type of contract and the reasons.If the form requirement is to make the parties deliberate,for example,there is a warning function to prevent hasty binding,it should be understood that the preliminary contract must have the same form as this contract.The approval requirement may be in the form of an preliminary contract,depending on its importance.Although preliminary contracts and contracts are interrelated,they differ not only in the conclusions of important documents,but also in terms of binding and breach of contract remedies.Therefore,in order to explore the effectiveness of the preliminary contract different from the contract,it is necessary to recognize that the preliminary contract and the contract are independent and then distinguish and define them.The relationship between the preliminary contract and the contract “mainly lies in the preparatory function of the preliminary contract”.The expression of this function in the law is nothing more than the relationship between the debt burden and the performance behavior.That is to say,the preliminary contract is the act of concluding this agreement as the performance target,and this agreement is the resulting debt relationship.Although some scholars believe that the preliminary contract and this contract are not two independent contracts,the latter is not a real contract,but a performance in these condition.However,limiting the expression of intention to perform a preliminary contract does not deny its nature as a legal act.Therefore,the division of the preliminary contract and contract is based on the relationship between the two independent contracts,that is,the relationship between the means and the purpose.In addition,the biggest difference between the preliminary contract and contract is the difference in the obligation to offer,contract produces the obligation to provide specific rights,money or services,while the preliminary contract will producea later conclusion of this agreement as an obligation,this is the meaning of the preliminary contract.However,the difference in the offering obligation is reflected in the difference of the parties' expression of willing in the agreement.As long as the parties clearly have or can be inferred to have the intention to enter into this agreement in the future,then no matter the content of the preliminary contract is very close to contract or not,the parties' expression of intention shall be respected and deemed as an preliminary contract.Effectiveness includes two aspects.On the one hand,it is a preliminary contract for the parties,and on the other hand,the preliminary contract for the parties not to perform legal remedies.The liability for breach of contract is closely related to its effectiveness.The preliminary contract,until the contract is determined to have limited effectiveness,is actually a criterion for judging the liability for breach of contract.The binding force of the preliminary contract refers to the obligations of the parties under the content of the preliminary contract.There are four main theories about the validity of preliminary contract : the negotiating doctrine,the contract doctrine,the content-determining doctrine,and the doctrine that is considered a contract.As a contract,the binding force of the preliminary contract shall be determined based on what it intends to express.Therefore,the validity of the preliminary contract cannot be generalized.The specific content of the preliminary contract or the integrity of the necessary clauses of the contract should be reviewed to determine whether the parties to the preliminary contract are only obligated to negotiate in good faith.Or the ultimate obligation to conclude this contract.According to the completeness of the main provisions of this agreement,the corresponding binding force is also different.Therefore,the preliminary contract can be divided into the preliminary contract of the negotiation obligation in good faith and the preliminary contract of the obligation to conclude another contract in the future.To go further,there are two types of the former,simple preliminary contracts and typical preliminary contracts.Parties with simple preliminary contracts typically have less trust in each other and pay less for it.As a criterion for judging a party,the contract is too strict and does not meet the principle of the contract law.However,there are stillsome main terms of the typical preliminary contracts for parties to negotiate further in good faith.These pending clauses actually indicate the openness of the parties to the agreement.The conclusion of a contract mainly refers to the complete preliminary contractual obligation.The emergence of a complete preliminary contract is often due to some legal obstacles,factual obstacles or subjective factors,and it is temporarily impossible to sign this agreement,so a preliminary contract is made and the contract is terminated.As for the duration of the right of claim for preliminary,article 936 of the Austrian General Civil Code provides one year as legal longest period.But China's Contract Law and relevant judicial explanation have no such rules,and considering it is obligatory right,so the author assumes that the rules on the length of limitation of actions shall be applicable by analogy,namely the parties should conclude a contract in next three years after making the preliminary contract and beyond the time limit the preliminary contract will lose its binding force.Whether it is a simple preliminary contract,a typical preliminary contract or a complete preliminary contract,the parties only have the obligation to negotiate in good faith or directly conclude the contract for the purpose of reaching the contract,and they cannot require the other party to perform the contract obligations according to the preliminary contract.The performance of the contract is a process in which the rights and obligations of the parties are specifically implemented and the purpose of the contract is achieved.As long as the contract is signed,whether it is called a preliminary contract or contract,both parties are obliged to perform the contract.After the performance obligations are completed,the process will be terminated.The preliminary contract will automatically expire regardless of whether the final contract is concluded or not.If the debtor fails to perform the contractual obligations,the debtor shall bear the liability for breach of contract,and the liability for breach of contract shall be the necessary guarantee for the preliminary contractual binding force.Compulsory performance,as a liability for breach of contract,is essentially a part of the right to perform,but for the preliminary contract of the obligation to negotiate,the court cannot make a judgment of compulsory performance,forcing the breaching party toperform the obligation to negotiate.Different from the obligation to negotiate,the academic and practical circles have disputes over the enforcement of their obligations.The preliminary contract shall conclude corresponding contract,and the preliminary contract for fulfilling the obligation shall be the inevitable reflection of the concept in the preliminary contract of the contracting party based on a certain trade basis or prior agreement,and unless it be dismissed or the parties have the content,the parties are bound to fulfill its obligations.Therefore,the recognition of the obligation to perform,the judgment should replace the will to establish the contractual relationship between the parties.At the same time,if the parties do not violate the expressed or inferred meaning,they can support the parties' obligations to fulfill the preliminary contract and the agreement to pay the claim.The Contract Law adopts the principle of full compensation for damages for breach of contract,including direct losses and indirect losses,also known as damages and loss of interest.Damage refers to the loss caused by the reduction of existing property.Regardless of the preliminary contract,if one party defaults,the non-defaulting party requires the other party to compensate for the costs and expenses incurred as a result of the preliminary contract.In general,the claim will be supported by the court.The term "loss of interest" refers to an increase in the property of a trusted person due to the occurrence of a cause of damage.Damages for breach of contract shall not include loss of opportunity.As a contract,the compensation for the loss of interest in the liability for breach of contract should be the performance interest,while the opportunity loss belongs to the category of trust interest.If the damage compensation includes the opportunity loss under preliminary contract,it is equivalent to the compensation for the performance interest of the contract in essence,which leads to the fact that the trust interest is equal to the performance interest,and also leads to the judgment conclusion of the performance interest while invoking the judgment rule of the trust interest compensation.Based on the expectation of entering into this contract in the future,the parties of the preliminary contract have reason to believe that the other party will be bound by the binding force of the preliminary contract.If the other party violates the obligation,itwill certainly make the party suffer the disinterest,which is the interest of the preliminary contract performance and should be compensated.The German Federal Supreme Court and the Swiss Federal Supreme Court have also supported the claim for compensation for the performance interest of this contract in practice,but the scope of liability of the breaching party shall not include the expected benefits after the signing and performance of this contract.Otherwise,the preliminary contract will replace contract and the conclusion of contract will be of no significance.