Discussion On The Principle Of Changed Circumstances And Its Application In Our Country

Now, the principle of changed circumstances which balances the contractual parties’ interests, and realizes legal justice is widely used in practice. In our country, though article 26 in “ Interpretation II of Contract law ” determined the principle of changed circumstances, however this regulation is too general and vague and it lacks unified practice experience in the judicial practice. Based on the above situation, the research emphasis of this thesis is to clarify the principle of changed circumstances with the rule of force majeure and commercial risk, and discuss how to accurately apply them in the judicial practice, especially how to apply the principle of the changed circumstances cautiously, then appreciate how the principle of good faith and the principle of fairness balance the interests of the contractual parties and how to realize the real fairness of the contract.Changed circumstances is also called the material adverse change, the principle of changed circumstances is a legal principle or a legal system when the circumstances has been changed after the contract being effective that caused by the reason not attributable to the parties, and which makes the basis of the contract shake or lose, it will be unfair to one of the contractual parties if continuing to perform the contract, on the above condition, the adverse party has the right to request the court or arbitration institution to change contract or terminate the contract. According to the relevant provisions in General Principles of the Civil Law and Contract Law, force majeure is the objective condition which is unforeseeable, unavoidable and insurmountable. In my opinion, we can distinguish the principle of the changed circumstances from the rule of force majeure through the following several aspects: first of all, from the legislative purposes, the rule of force majeure intended to avoid the obligation and liability of the breaching party, but the purpose of the principle of the changed circumstances is to adjust interests between the contractual parties when contract basis or environment changes abnormally. Second, from objective performance, force majeure generally perform like natural disasters or abnormal social change which cannot be foreseen, avoided and overcame; and changed circumstances is embodied in the severe change of the social and economic situation, which is the basis of the contract. The key point that is the essential difference between the principle of changed circumstances and the rule of force majeure is that force majeure lead to a totally un-performance,but changed circumstances just lead to a difficult performance and lead to unfair consequences or cannot realize the contract purpose. Finally, in the application of the procedure and legal effect, when suffering from force majeure, the party only need to prove the fact of force majeure, then can directly terminate the contract and need not to undertake any liability; but if the party intends to apply the principle of changed circumstances, this party needs to request the court or arbitration institution to modify or terminate the contract as the prerequisite. Business risk is an objective economic phenomenon which brings business opportunity or possibility of profit or loss caused by various uncertain factors to the businessman in the commercial activity. We can distinguish the principle of changed circumstances from business risk depend on the possibility of foresee and the possibility of bear. It is easy to understand that the business which can be foreseen or can be bore may apply the principle of the changed circumstances. In my views, the business risk which can be foreseen but unbearable should not to apply the principle of changed circumstances; the business risk which cannot be foreseen but can be undertook may apply the principle of the changed circumstances if other conditions about the principle of changed circumstances also be met.In the application of the principle of changed circumstances should pay attention to the following points: the premise of application is that the parties request the people’s court or arbitration institution to modify or terminate the contract; should adhere to priority mediation, and generally speaking the court or arbitration institution should modify the contract as the first step, unless modifying the contract cannot resolve the problem; judicial review system has its necessity. And concerning whether to introduce renegotiate obligation, in my opinion, two contractual parties have the right to choose by themselves. Renegotiate obligation shall be not contain commitments, which does not require the parties to negotiate a new contractual agreement. Application of the principle of changed circumstances can produce legal effect to modify or terminate the contract, only when changing the contract can’t solve the problem of unfairness, the parties can terminate the contract. In addition, after the termination of the contract, according to the principle of good faith and fairness, the original negative influence party should make a reasonable compensation to the other party.After the theoretical analysis about the principle of changed circumstances, the practical analysis is also important. In my eyes, in general the new policy of housing market can be divided into influence policy which including increasing of the proportion of deposit and loan interest rates and limited policy which including limit credit and limit purchase. Breach of contract disputes caused by influence policy should be a concrete analysis and should not be routinely as commercial risk, or changed circumstances; in general, breach of contract disputes caused by limited policy should apply the principle of changed circumstances, the reasons are as follows: limited policy should not belong to the normal business risk because the issue of limited policy could not be foreseen or should not be foreseen at the time of the conclusion of the contract and lead to a difficult performance; in addition, breach of contract disputes caused by limited policy shouldn’t apply the rule of force majeure because the issue of limited policy cannot lead to a totally un-performance, but lead to a difficult performance.The above is my basic point of views about the principle of changed circumstances and its application, in order to prove my views, this thesis includes following contents:(i)the concept and constitutive requirements about the principle of changed circumstances;(ii) the boundaries of the principle of changed circumstances, force majeure and business risk;(iii) the application and legal effect about the principle of changed circumstances;(iv) finally, discussing the application about the principle of changed circumstances in breach of contract disputes which arise from policies of housing-market, thus we can understand and apply the principle of the changed circumstances well in practice.