Changes in Affairs and Contract Theory

Author: Sun Meilan
Publisher:
Publish Date: 2004-12-01
Features: According to the principle that contracts must be honored, if one party fails to fulfill its obligations as stipulated in the contract, it must bear corresponding responsibility. However, if unforeseen, insurmountable, or unavoidable objective circumstances arise after the contract is formed, rendering the fulfillment of the contract impossible, or although fulfillment is possible, but the value exchange relationship between the two parties to the contract is severely disrupted, or the fulfillment of the contract has completely lost its meaning, in such cases, if the principle of honoring contracts is still insisted upon, the law would be unduly harsh. For this reason, there exist systems such as the doctrine of frustration of contract, the doctrine of frustration of the basis of the transaction, the doctrine of force majeure, the doctrine of change of circumstances, and the doctrine of hardship. Each chapter of this paper conducts a comprehensive, systematic, and in-depth study of the doctrine of frustration of contract in common law and civil law, the doctrine of the basis of the transaction in German law, as well as the corresponding rules in Japan, China, and the UN Convention on Contracts for the International Sale of Goods (CISG), and the Uniform Rules of International Commercial Contracts (PICC). On this basis, the paper compares these rules and systems as a whole, clarifies their corresponding relationships, analyzes the characteristics, existing problems, and differences among them, and the reasons therefor. Finally, it proposes improvements to China's doctrine of change of circumstances in contracts and legislative design for relevant content in the future Civil Code.
Chapter 1 is the introduction. It first elaborates on the key concepts of change of circumstances, alteration of circumstances, frustration of contract, and frustration of the basis of the transaction, then analyzes the research status of this topic domestically and internationally, and finally presents the research methods and basic structure of this paper.
Chapter 2 is the doctrine of frustration of contract in common law. This chapter systematically explores the doctrine of frustration of contract from aspects such as its nature, historical evolution, theoretical basis, applicable conditions and limitations, types of frustration, legal consequences, and debates over addressing the shortcomings of the doctrine. Frustration of contract terminates the contract immediately and automatically, and courts have no power to adjust the contract. This is an important reason because the doctrine is primarily applicable in cases where the fulfillment of the contract becomes unexpectedly impossible.
Chapter 3 is the doctrine of the basis of the transaction in German civil law. This chapter examines the emergence and development of the theory of the basis of the transaction, its applicable conditions and scope, the legal effects of the lack or loss of the basis of the transaction, as well as the main case types in German judicial practice for handling "change of circumstances," and the legislative process of the doctrine of the basis of the transaction. The uniqueness of the doctrine of the basis of the transaction lies in the fact that a situation where the circumstances that served as the basis of the contract at the time of formation are later found to be incorrect is considered a change of circumstances. The effect of applying the doctrine of the basis of the transaction is to retain the contract as much as possible by adjusting it, and only consider terminating or ending the contract when it is absolutely necessary.
Chapter 4 is the theory of change of circumstances in Japanese civil law regarding contracts. This chapter first elaborates on the emergence and development of the Japanese doctrine of change of circumstances, then analyzes the surrounding theories and provisions in Japanese civil law, compares these theories and provisions with the narrow doctrine of change of circumstances, analyzes the applicable conditions and scope of the narrow doctrine of change of circumstances in Japan, and finally discusses the effects of change of circumstances and the obligation to renegotiate. In Japan, the doctrine of change of circumstances was established in academic theory only after World War II, influenced by the theory and case law of the basis of the transaction in Germany. The surrounding theories and provisions in Japan, such as the doctrine of (unanswerable defense) and the provisions on change of circumstances in the Landlord and Tenant Act and Rental Act, serve to fill gaps that cannot be addressed by either the doctrine of debt non-performance or the doctrine of change of circumstances. Compared to the narrow doctrine of change of circumstances, their applicable conditions are more relaxed. Japanese scholars collectively refer to these as the broad doctrine of change of circumstances.
Chapter 5 primarily studies the exemption provisions in the UN Convention on Contracts for the International Sale of Goods (CISG) and the provisions on the doctrine of hardship and the doctrine of force majeure in the Uniform Rules of International Commercial Contracts (PICC). This chapter points out that CISG Article 79 (regarding exemption) is essentially equivalent to the "doctrine of force majeure" in civil law, rather than the "doctrine of change of circumstances." The doctrine of hardship stipulated in PICC can be considered a fusion of relevant concepts and systems in most legal systems, such as the "rules of impracticability and frustration of purpose in the doctrine of frustration of contract," the "doctrine of frustration of the basis of the transaction," and the "doctrine of change of circumstances," among others. At the same time, it is not entirely equivalent to any single concept or system. The doctrine of force majeure stipulated in PICC is also a fusion of rules such as the "rule of non-performance in common law," the "doctrine of force majeure in civil law," and the "rule of non-performance subsequent to the contract that cannot be attributed to either party." The paper argues that compared to other similar rules and systems discussed, the doctrine of hardship and the doctrine of force majeure stipulated in PICC are the most detailed and reasonable.
Chapter 6 first analyzes the emergence and development of the concept of change of circumstances in Chinese civil law, as well as the connotation and legal nature of the concept of change of circumstances in Chinese civil law. It then categorizes the theories and provisions in Chinese civil law regarding change of circumstances after the contract is formed and provides a detailed comparison of concepts such as force majeure, the rule of force majeure, the allocation of risks, and the rule of change of circumstances. This chapter finds that previously, other scholars in mainland China have been using terms such as "force majeure," "change of circumstances," and "hardship" in both the sense of "rules" and "objective circumstances" without awareness. The paper points out that after distinguishing the use of terms such as "force majeure" and "rule of force majeure," "change of circumstances" and "rule of change of circumstances," and "hardship" and "rule of hardship," the relationships between the corresponding concepts and rules become very clear.
Chapter 7 is a comparative law analysis, which comparatively examines the theories, rules, and systems discussed in the previous chapters, analyzes their differences and reasons therefor, their corresponding relationships, as well as the existing problems and points of reference for each system. The final chapter proposes improvements to China's theory of change of circumstances in contracts. This chapter also formulates detailed provisions for the rule of force majeure and the rule of change of circumstances for China's future Civil Code.