The Right To Frustrated Expenses Compensation In Contract

When it is difficult to prove the creditor’s performance interest,or in the occasions of immaterial contracts,the creditor’s performance interest would be assumed to be zero.As the creditor has only incurred expenses based on the trust in the debtor’s due performance of his/her obligation of payment,the creditor will inevitably be trapped in economic non-interest if no relief is provided to him/her.Frustrated expenses are necessary to be compensated.The Presumption of Profitability behind the Performance Interest Theory does not have generality in daily economic life.Its scope of application is rather narrow and is limited to bilateral contracts,but is not applicable to non-profit contracts.After the revolution of the German Obligation Law,the Performance Interest Theory is also nearly abandoned by the German academy.The Reliance Interest Theory mostly regard performance interest as one type of reliance interest and the creditor is entitled to free choice thereunder.Such understanding is contrary to the common demarcation under the law of compensation.Application of the Reliance Interest Theory will lead to unlimited expansion of the debtor’s obligations.Further,given that the Civil Code of China does not have explicit basis for the right to claim,it is also difficult to find basis for the creditor’s right of choice under the positive law,and the explanation power is rather weak.“Frustration interest” is a special interest in between“performance interest” and “reliance interest”.Although it would impact the binary system of “performance interest” and “reliance interest”,but would also therefore protect the interest that had been left unprotected in the cross field between them.Among the special “expenses”,the creditor cannot be compensated for his/her own payment or loss of transactional opportunity in relation to the relevant object.The saving and expenditure of the expenses shares one identity and can be compensated as an exception.Likewise,neither is the “expenses” for loss of transactional opportunity compensable.Fixed-term expenses can have uniformed and consolidated explanation under the current obligation law system,the compensability of which is thus not doubtful.The basic scope and type of compensation may be ascertained by the reliance elements.With regard to the timing,if obligor is offeror,the starting point of the creditor’s protectable reliance should be when the offer is effective and irrevocable.The ending point of the creditor’s protectable reliance should be when the creditor knows or should have known that the right of payment has ended.As an exception to the timing,the expenses for conclusion of agreements and the expenses incurred by the creditor before ratification by the principal in the circumstances of unauthorized agency should be compensated.With regard to the type of expenses,as the reliance elements are irrelevant,inspection fee,examination fee,appraisal fee,contract liquidation fee should not get compensation.As a right to claim under the law of compensation,the right to frustrated expenses compensation may directly apply to contributory negligence and mitigation of loss(under Articles 592(2)and 591 of the Civil Code of China)to limit or dispense with the right to claim of the creditor.However,it cannot be considered that the creditor has the general unreal obligation to substitute for transaction and to use the expenses otherwise.One of the requirements for the right to frustrated expenses compensation is that the expenses are real but finally in vain,otherwise,the creditor’s right to frustrated expenses compensation can be limited or dispensed with.The debtor’s plea of causal relationship may also be considered to prevent unjust enrichment of the creditor because of breach of contract by the debtor.Even if adopting these measures,the debtor’s obligation may still have the concern of infinite obligation,and the risk should be allocated according to the principle of predictability under Article 584 of the Civil Code of China.