The Legal Effect Of Pre-contract And Liability For Breach

As a way to fix the results of preliminary negotiations,the pre-contract is widely used in the market dealing.But it also brings lots of disputes.The contract law of our country does not have the explicit stipulation to the pre-contract,but in 2012,the Supreme People’s Court regulated the form and effect of pre-contract in the form of judicial interpretation for the first time.The judicial interpretation acknowledges the status of a pre-contract as an independent contract and provides a criterion for judging the validity of the appointment of a sales contract.However,due to the fact that the judicial interpretation is not clear about the specific effect of the pre-contract and the applicable standard of the breach of pre-contract,scholars and practitioners have been arguing about it.Therefore,this article focuses on the effectiveness of the pre-contract and breach of contract remedies based on basic theories of pre-contract,in order to provide some suggestions for the application of norms of the pre-contract,and further develop its value.In addition to the introduction,this paper is divided into the following three chapters:The first chapter: the basic theory of the pre-contract.This chapter introduces the characteristic and constitutive requirements of the pre-contract,and analyzes the differences between the pre-contract and the letter of intent,memorandum and contracts with conditions precedent which do not have the effect of pre-contract.The second chapter: validity of the pre-contract.The first section introduces four theories of the validity of pre-contract: “shall be negotiated theory”,“should be concluded theory”,“content determination theory” and “a combination of subjective factors and objective factors theory”.The second section is based on the empirical research on the validity of the pre-contract,and analysis of typical cases and the way of court hearing in such cases.The third section is an analysis of the advantages and disadvantages of various theories.The author thinks that “the theory of negotiation” shall be proved to be difficult and may be a mere formality,and “should be concluded theory” to be too harsh and it may against the autonomy of civil law principle.The content determination theory confuses the difference between pre-contract and contract,which makes pre-contract lose its independent legal status.The author thinks that “a combination of subjective factors and objective factors theory” relatively reasonable.Firstly,we should explore true meaning expression of the parties who are to reach an agreement in the future.Secondly,when the party’s intent is unclear,it should be analyzed with the whole content of the contract.If the pre-contract only includes some basic elements of the contract and parties need more consultation on the main clauses,the pre-contract shall apply to “the theory of negotiation”.If the main terms of the contract have been agreed or the basic agreement is clear,even if the two sides do not need to sign the contract,the pre-contract can also be performed properly,it may adopt “should be concluded theory”The third chapter is about the liability for breach of pre-contract.In the first section,we shall distinguish the liability for breach of pre-contract and liability for fault(culpa in contrahendo).In the second section,the necessity and feasibility of compulsory performance are analyzed with examples.It is unreasonable that setting up the only standard of actual contract performance.We shall make a concrete analysis of each specific issue according to the effect of pre-contract.The third section describes the scope of the damage compensation.And it is necessary to choose reliance interest or performance benefits according to the stage of the pre-contract.The forth section mainly analyzes the nature of the deposit or liquidated damages stipulated in the pre-contract.The fourth chapter is the suggestions of improving the legislation and judicial rules of pre-contract in our country.In view of low level of validity of the relevant judicial interpretation of pre-contract and lack of strict legal system in China,the author proposes that great efforts should be made to bring perfection on the pre-contract legislation: at first,we should stipulate pre-contract in the general provisions of contract law.Secondly,it is necessary to make clear the conditions of establishment of the pre-contract and the corresponding legal effect.Thirdly,we should confirm the principle of liability fixation,the burden of proof and the general principle of pre-contract.In order to avoid the different sentence,the judge should first distinguish pre-contract and contract,and acknowledge the legal status of an appointment.Secondly,it is necessary to determine the validity of the pre-contract according to the necessary clauses of the contract.Finally,damages for breach of an appointment may be determined in accordance with the state of pre-contract.If the clauses of the pre-contract are more mature and closer to the contract,the compensation will be closer to the scope of compensation for the performance of interest;on the contrary,it will be closer to the compensation for damages of reliance interest.