Research On The Contract Rescission By The Default Party

The traditional view is that only the observant party can exercise the right to terminate the contract.However,the court upheld the default party's claim to terminate the contract in “Feng Yumei Case”,which was published in Gazette of the Supreme People's Court,and this caused controversy about the right to terminate the contract.The provision about the right to terminate the contract was revised several times before it was finalized in the process of establishing the civil code in our country,and the statute was canceled when the civil code was examined.However,Supreme People's Court's view in Minutes of Meeting about judicial is that the default party can apply to a people's court to terminate the contract.I sort out and analyze different views of theorists and practices to draw a conclusion.The first part raises the question.I try to illustrate the controversy by sorting out Supreme People's Court's view and analyzing the legislative process of the civil code in our country.The second part explores different views of theorists and practices.Courts make different judgments,and scholar hold three different viewpoints.There are three major issues.Firstly,how should we explain article 94 and article 110 of Contract Law.Secondly,if it is either necessary to allow the default party to terminate the contract.Finally,if the move can increase efficiency.The third part study laws of other nations.The civil law countries forbid the default party to terminate the contract.The theory of efficient breach of the countries of common law system is similar to the right to terminate the contract.The main difference is that someone thinks that allowing the default party to terminate the contract can avoid the deadlock.However,the theory of efficient breach is not recognized in China,and it may not increase efficiency.The fourth part analyzes the right to terminate the contract.We can not come to a conclusion that the default party can terminate the contract by explaining Contract Law.The observant party has to exercise right to claim indemnity and put to the proof after the termination of the contract.However,courts have to judge directly.Otherwise,the observant party has to report to the court separately and resources will be wasted.The fifth part find solutions to solve the deadlock.Allow the default party to terminate the contract is not the only way to solve the deadlock.We can solve the problem by mitigation.The observant party can not request remedy for losses if he did not take appropriate measures to limit losses.The observant party,as a rational trader,will take appropriate measures including terminating the contract to avoid the spread of losses.The fault of any party to the contract would not influence the result.The observant party has to start to take appropriate measures if the default party refused to performance of contract on the ground of article 110 of Contract Law.We can decide whether the measures are appropriate by applying economic criterion,reasonableperson standard and bona-fide standard.