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Based on the understanding of related theories and practices, this article mainly analyzes the following two issues:

1. The legal application relationship of various remedies for breach  of contract;

2. The principle of liability for breach of contract damages.

一、Regarding the legal application relationship of various breach of contract relief rights

The provisions of the "Civil Code" that came into effect on January 1, 2021 on the right to remedy for breach of contract are mainly in the following parts: Chapter 4 "Performance of Contracts" (Articles 525-528, simultaneous performance of defense rights, first performance of defense rights, uneasy Right of defense); Chapter 7 "Termination of Contract Rights and Obligations" (Articles 563-567, right to terminate the contract); Chapter 8 "Liability for Breach of Contract" (Articles 577-593, continued performance, remedial measures, compensation for losses, etc.) ). The provisions on the relief of breach of contract in the "Civil Code" are more scattered, and the content is both inherited and changed compared with the relevant provisions in the previous judicial documents such as the "Contract Law".

   Breach of contract refers to the objective failure to perform the contractual obligations and does not take subjective fault as a constitutive element. Liability for breach of contract is an overarching concept, and the specific methods of assuming liability for breach of contract should be implemented in specific methods such as actual performance, remedial measures, compensation for losses, price reduction, payment of liquidated damages, and deposits. The main points of the legal application and identification of various breach of contract relief rights are briefly discussed as follows:

01 Three types of defense rights in Chapter 4 "Performance of Contract" (simultaneous performance of defense rights, first performance of defense rights, and uneasy defense rights):

The three kinds of defense rights stipulated in this chapter are related to the order of performance of the contract. Among them, the simultaneous performance of the defense rights and the first performance of the defense rights are easier to understand. The right to refuse/reject the corresponding performance request. Here we need to pay attention, if one party does not perform properly (that is, the performance does not meet the agreement), the other party has the right to refuse the "corresponding" performance request, rather than completely or arbitrarily refuse to perform the contractual obligations, such as a sales contract. If the seller does not issue an invoice to the buyer, the buyer cannot refuse to pay for this reason (except as specifically stipulated in the contract).

The right of an uneasy defense is more special, in that the party who should perform the debt first can suspend the performance when there is a serious deterioration in the business situation of the party who performs the debt later, such as the situation specified in Article 527 of the Civil Code. The circumstances stipulated in Article 527 of the Civil Code are situations in which the other party loses or is likely to lose its ability to perform debts. If such a situation occurs on the party to perform later, it can be reasonably doubted whether it will be able to continue to perform debts in the future. Therefore, the right to suspend performance was granted. However, if such circumstances do not affect the ability to perform, the performance should still be performed. Therefore, Article 528 stipulates that the suspension of performance will be notified and if the party to perform later provides appropriate guarantees, the performance will be resumed (because the provision of appropriate guarantees can guarantee the performance of the first party’s benefits) in order to prevent the first party from abusing/misusing the uneasy defense right to delay or evade the performance of the debt, and giving the party that has a special situation a remedy to continue to perform the contract, and improve efficiency.

02 The right to terminate the contract in Chapter 7 "Termination of Contract Rights and Obligations"

Article 563 of the Civil Code stipulates that the party has the right to terminate the unilateral contract, that is, when the circumstances listed in this article occur, the party can terminate the contract. The circumstances listed in this article are mainly situations that may lead to the failure to achieve the purpose of the contract, including force majeure resulting in failure to achieve the purpose of the contract, anticipated breach of contract, delay in the performance of major debts after urging, delay in performance of debts, or other breaches of the contract that make it impossible to achieve the purpose of the contract.

(1) The occurrence of force majeure makes it impossible to achieve the purpose of the contract: it will cause the existence of the contract to be meaningless. Therefore, the termination of the contract is an appropriate solution. What needs attention here is that this kind of situation needs to achieve the consequence of "making it impossible to achieve the purpose of the contract". If the consequence of "making it impossible to achieve the purpose of the contract" is not achieved, the contract can still be performed, and there is no unilateral right to terminate at this time. In addition, due to its unforeseeable and unavoidable objectivity, force majeure can usually reduce or exempt the liability for breach of contract accordingly.

(2) Anticipated default: Anticipated default refers to the fact that before the expiration of the performance period, one of the parties clearly expresses or shows by its own behavior that it will not perform the main debt. At this time, the contract performance period has not expired, the conditions for performance of the obligation have not yet occurred, and there is no actual default. Actually, the contract can no longer be performed, that is, the contract is “dead”. Resolving it as soon as possible can save resources, so it gives the other party the right to terminate the contract. Regarding the determination of expected default, the core is to determine whether the non-performance is the main debt (such as the refusal to deliver most of the goods in the sales contract, the buyer refuses to deliver the house or pay the purchase price, etc.), and whether it can be determined that there will be a certain or a high probability of non-performance (explicit/implicit) show), only if they are available, can it be judged in advance that the expected defaulting party has indeed violated the contract, and the expected default is involved.

(3) Delayed performance of major debts has not been fulfilled after urging: The core concept is similar to expected default, that is, the major debts of the contract have not been fulfilled on time, but the difference is that the default has occurred in this situation. This is the law that gives the observant party the right of relief after the breach of contract occurs. It does not need to achieve the consequences that the contract purpose cannot be realized (but in fact, the delayed performance of the main debt has already had a great impact on the realization of the contract purpose). It is necessary to pay attention to whether the delayed performance is the main debt. At the same time, because the termination of the contract has a greater impact on a single transaction, the pre-procedure set up requires a reminder. After the reminder, the unilateral right of termination may be exercised if it is still not performed within a reasonable period of time.

(4) Delay in performance of debts or other breaches of the contract that make it impossible to achieve the purpose of the contract: Unlike the previous situation, the core of this situation is that a breach of contract has occurred and "the purpose of the contract cannot be achieved", and it is not limited to the "main debt". There is also no requirement for "reminder", but it limits the consequence that "cannot achieve the purpose of the contract". When rescinding the contract accordingly, one must pay attention to whether there is a breach of contract, whether the consequences of "unable to achieve the contract objective" are achieved, and whether there is a causal relationship between the consequences and the breach of contract. In addition, with regard to the exercise of the right to terminate the contract, the other party will be notified within the statutory or agreed time limit. The contract will be terminated when the notification reaches the other party. The contract will be terminated when a copy of the bill of complaint or a copy of the arbitration application is served to the other party). At the same time, Article 565 of the Civil Code grants the dismissed party the right to object, and can request the people's court or arbitration institution to confirm the validity of the dissolution, which limits the abuse of unilateral dissolution rights. Regarding the handling after the termination of the contract, Articles 566 and 567 provide more specific guidance.

03 Chapter 8 "Breach of Contract Liability" in the Undertaking of Liability for Breach of Contract

Chapter 8 of the "Civil Code" lists the responsibilities for breach of contract. Article 577 is a blanket clause. It clearly states what breach of contract is and the consequences. If the performance of the contractual obligations does not conform to the agreement, it will be liable for breach of contract such as continuing to perform, taking remedial measures, or compensating for losses.")

In the legal application of liability for breach of contract, the court may use Article 577 as the legal basis for the principle of liability for breach of contract, but it is actually not accurate. If the liability for breach of contract is to continue to be performed, fault should not be considered and no liability is involved. The problem that needs to be resolved is the ability or inability to continue to perform; the compensation for damages only considers the fault, and then involves the imputation. Some courts will use this article as the basic norm for the right to claim damages, but this article should be a blanket clause, and the ultimate direct basis should be implemented in the specific way of assuming the liability for breach of contract (that is, continue to perform, take remedial measures, and compensate for losses, repair, rework, replacement, return, price reduction or remuneration, liquidated damages, deposits, etc.) and the related terms, rather than just directly based on the definitional provisions.

二、 On the principle of liability for breach of contract damages

The principle of liability for damages for breach of contract stipulated in our country's "Civil Code" is mainly the principle of strict liability, which also includes the principle of liability for fault. The brief discussion is as follows:

1. The principle of strict liability: Article 577 of the "Civil Code" will be liable for breach of contract, including "non-performance of contractual obligations" and "performance of contractual obligations does not conform to the agreement (that is, improper performance of contractual obligations)", which reflects strict the principle of liability imputation, that is, as long as there is a “non-performance” or “inappropriate performance” of contractual obligations, they will be liable for breach of contract such as continuing to perform, taking remedial measures, or compensating for losses. The principle of strict liability is conducive to guaranteeing the performance of contracts and the safety of transactions, and safeguarding the interests of the observant parties.

2. The principle of fault imputation: If the principle of strict liability is adopted and fault is not considered at all, in some cases the breaching party may be too strict. Therefore, the "Civil Code" provides for exemption and mitigation of liability, such as: Article 590 stipulates that if the contract cannot be performed due to force majeure, part or all of the liability will be exempted based on the influence of the force majeure; Article 591 stipulates that if the non-observing party fails to take appropriate measures and the loss is enlarged, the party in breach of the contract will not be compensated for the enlarged part of the loss; Article 592 The article stipulates that if the observant party is at fault for the occurrence of the loss, the corresponding loss compensation can be reduced, and so on. The above-mentioned special regulations embody the principle of fault rules, which ensure fairness while ensuring transaction safety and efficiency.

There is no general clause on compensation for breach of contract damages in our country's law. Compensation for breach of contract damages mainly includes compensation for losses and payment of liquidated damages (or deposit penalties). Whether it is compensation for losses or payment of liquidated damages/deposits, they actually have a certain degree of obligation to the original contract. The expansion of the above has a certain compensatory or punitive nature. Therefore, unlike continued performance, compensation for losses usually needs to consider the fault of the contract party (in addition to the fault, it also depends on whether there is a comprehensive judgment of breach of contract, loss, causality, etc.). If all the losses are caused by the fault of the defaulting party, the defaulting party will be liable for all losses; if the occurrence or expansion of the loss is also due to the observant party, for example, the observing party does not take appropriate measures to cause the loss to increase, then the breach of contract party’s liability for damages should also be reduced accordingly (Article 592, paragraph 2 of the Civil Code); if both parties have no fault for the occurrence of the loss, such as a breach of contract due to force majeure, they will be exempted from liability according to the impact of force majeure; if both parties violate the contract, they will each bear corresponding liabilities (Article 592, paragraph 1 of the Civil Code); if the breach is caused by a third party, they will be liable to the other party for breach of contract in accordance with the law. How to apply the principle of liability in practice must be comprehensively confirmed according to specific circumstances.

In addition, the amount of compensation for losses: should be equivalent to the losses caused by the breach of contract, including the benefits that can be obtained after the performance of the contract.

Regarding the scope of compensation for losses, Article 584 of the Civil Code defines that “the amount of compensation for losses will be equivalent to the losses caused by the breach of contract, including the benefits that can be obtained after the performance of the contract.” Therefore, the scope of compensation depends on how to understand “loss". "Loss" should include the loss of expected benefits (that is, the benefits that can be obtained), the loss of inherent benefits, the loss of trust benefits, and the loss of non-property benefits (such as mental loss. There is no clear regulation in our country for the time being. In practice, it is usually carried out explanation from a perspective not prohibited by law: Although Article 996 of the Civil Code mentions the mental damage caused by breach of contract, it is not clear whether the "mental damage compensation" in the "not affecting the injured party's request for mental damage compensation" is a kind of liability for breach of contract In order to better protect the observant party, it should be understood as a kind of liability for breach of contract, and it cannot be considered that only infringement can exist for mental damage compensation).

Compensation for losses is mainly to solve the benefits that one party should obtain after the normal performance of the contract after one party breaches the contract, which is realized by means of money. In principle, the contract in my country does not support obvious punitive damages (e.g., when the liquidated damages are too high) It can be lowered), but because the loss is usually difficult to accurately calculate with mathematical formulas, a certain floating interval should be allowed.

"Statement:

This article was originally created by the lawyers of JAVY Law Firm. It only represents the author's own views and should not be regarded as a formal legal opinion or suggestion issued by JAVY Law Firm or her lawyers. If you need to reprint or quote any content in this article, please indicate the source.