Research On The Rule Of Reasonable Foresight On Breach Of Contract

In the marketing economic environment, the both parties will be brimming witha variety of unpredicted risk in economic intercourse. One is likely to bear the lossesin a commercial contracts due to the other side’s breach. Now as many marketingtradings, however, are interrelated, one default is likely to lead to a series of events ofdefault with superposed loss or a domino effect. Therefore one’s breach in thecontract may be course a huge unpredicted risk, and even an explosion of litigationwhich is no good to the rational allocation of judicial resources or social stability.Thus the rule of reasonable foresight came into being. In the civil legislation of thecountries the rule works as a basic restriction measure to limit the extent ofcompensation caused by contract breach. Yet this rule is complex and indeterminatein practical application for its containing many elements of value judgments. The rule gives a large spare of discretion to the case-handling judges and arbitrators, while italso touches off a lot of controversies. The rule entered the Article113of the1999version of Contract Law in China, which explains the risks borne by the defaultingparty should be a foreseeable sum or, that’s is to say, a reasonable amount. But therule is far less than given sufficient attention generally. What’s more, the relevantlegislation do not serve to a set of effective and workable standard on the basis of therule for the judicial practice and thence judges avoid to applying of this rule innumerous cases deliberately. Therefore it is vital to clarify the connotation andsignificance of the rule in judicial practice thoroughly.This paper attempts to explore the relevant legislation and theoretical origin ofthe reasonable foresight rule and to study the improvement and development of therule on the modern legislate and judicature in China.This article consists of the following four parts:Chapter I: By wholly inspecting and comparison the legislation and prejudicationof Roman law, civil law and common law in different countries to analyze the specificmeaning and the development course of reasonable foresight rule. The rule originatedfrom Roman law, which has been confirmed in the French civil law and thus the rulehad a wide range of development in common law, and gradually became a requiredlaw used to limit the compensation of contract breach. The law clarifies that thecompensate should only be the losses foreseen when the parties formed the contract.Chapter II: By using the theory of Jurisprudence and Law and Economics toanalyze the theoretical value of the reasonable foresight rule, and expounded the significance of the current economic situation. The rules are conducive tosafeguarding social fairness, development of market economy and encouraging mainmarket players in transactions. In the background of the global economic situation, itis crucial to establish a fairness and sincerity marketing order for economic recovery.According to the rule the defaulting party only liable for the foreseeable loss whichcould narrow the loss of the bilateral involved.Chapter III: By comparing and analyzing with the rule and the specific concepts,such as tort liability and causal nexus to better understanding the ties anddistinguishment from the rule and other concepts and to pave the way for betterdescribing its contents in latter chapter.Chapter IV: By sorting out and analyzing the specific content of the rule in themain body, time point, the reference, and the degree to general explain the contents ofthe rule and reach conclusion what content should take in our rule.Chapter V: The author in this thesis hold the view that our reasonable foresightrule is still in its fledgling stage. As the highly abstract of our rule in Contract Lawwhich is difficult for Judges to understand and apply to cases. The correct applicationof the rules case is rarely. Based on this phenomenon, The author raises the point thatwe should clarify the position and the specific criteria of the rule and further improvethe case guidance system by utilizing the case system in the common law as refence.By the above method to turn the rule to an operational one as a vital protective coverof limit the amount and the scope of compensation.