Discussion On Legal Consequences Of Dissolution Of Contract

In the area of modern contract law, the dissolution of contract system seen as anextremely important law system has been paid attention to by international legislation,plays an important role in the theoretical circle and judicial practice, and performs amotivational role for stabilizing the economic and social order and developingeconomic benefit. Serving as one of the law relief means, the dissolution of contractsystem offers effective law protection for party’s right. And it is the result of insistingon the contract freedom and maintaining the balance of interests, and the presence ofthe concept of contract justice. However, there are many controversies of the legalconsequences of dissolution of contract, making it hard to perform its due role injudicial practice. From the angle of protecting and balancing the contracting party’sinterests and exactly presenting the principle of meaning autonomous and contractfreedom, and based on the China’s judicial practice, understanding and comparing theexperience as well as the relevant theories in detail, issues and controversies ofdissolution of contract existing in theory and practice are tried to be done up and deepanalysis of the three issues which are the most controversial in legal consequences ofdissolution of contract and have the greatest impact on judicial practice are done inthis paper. Among them there are issues about the restoration and compensation fordamage on the basis of cognizance of retroactive effect for the dissolution of contract,which make further understanding of the legal consequences of dissolution ofcontract, clearing the relevant issues of dissolution of contract met in judicial cases.Therefore, reasonable suggestions are expected to be proposed for China’s legalconsequences of dissolution of contract.First, dissolution of contract is introduced. Based on the characteristics,properties, purpose and function of dissolution of contract, different understandingsand form classifications of dissolution of contract are done by two law systems todiscuss the meaning of dissolution of contract in this part. And comparation analysisis done for the dissolution of contract system and relevant systems, like termination ofcontract, liability for breach of contract and rescission of contract, and then the prominent differences are achieved. Thus the connotation of dissolution of contract isdefined in this paper and the situation in which dissolution of contract is seen as legalrelief is confirmed. This part offers reference for the unfolding of later parts.Second, retroactivity of dissolution of contract is illustrated. The legislations forretroactivity of dissolution of contract in Anglo-American law system, continentallaw system and international convention are investigated and compared, leading tothe dispute of different value orientation for dissolution of contract. After theevaluation and analysis of direct effect theory and liquidation relationship theorywhich are the most controversial, liquidation relationship theory is affirmed as thetheoretical foundation, that is, the dissolution of contract non-retroactively eliminatesthe rights and obligation under the contract, but transfers to a liquidation relationship.Considering from the aspects of protecting party’s legal rights, maintaining social andeconomic order and keeping the legal system harmonious, the author thinks that theliquidation relationship shall be adopted by dissolution of contract; liquidationrelationship theory shall also be taken on retroactivity of dissolution of contract byChina’s legislation. This part has a central role in discussing disputable problems.Third, dissolution of contract is discussed and restored. In conformity with thethree arguments on the properties of restoration right of claim, the conclusion isachieved through doing the analysis and comparation that restoration right of claim isnot the claim right of returning unjustified enrichment so as the petition right onrecovery of belongs, but right to petition of obligatory right. The scope of restorationis further affirmed, including returning the pay things and value compensation forimpossibility of performance and possibility of excluding of value compensation, isintroduced briefly. The most important manifestation for legal consequences ofdissolution of contract is discussed in this part.Fourth, dissolution of contract and compensation for damage are stated in thispart. On the basis of two mainstream arguments, selectivism and coexistenceprinciple, the argumentation is done, affirming that coexistence principle shall beadopted for dissolution of contract and compensation for damage, that is, they canexist at the same time. Meanwhile, interest compensation for damage is affirmed tobe the compensation for damage after dissolving the contract. Hereunder, the scope ofcompensation for damage is determined to contain compensation for damage inacquirable interests and the restriction rules of that are also analyzed and illustrated.In discuss procession, the purpose that the retroactivity of dissolution of contract shall adopt the liquidation relationship theory is emphasized in the whole passage andthen after dissolving the contract the restoration is considered as right to petition ofobligatory right; returning pay things is seen as the principle; value compensation isthought as supplement. Issues about compensation for damage after dissolving thecontract are also explicated, namely coexistence with dissolution of contract.Compensation scope of that is loss of performing benefit, including loss ofexpectation benefit and other losses.