Research on Contract Forms

Author: Wang Hong
Publisher:
Publish Date: 2005-06-01
Features: The study of formal contracts primarily involves three fundamental issues: first, why the law requires formal mandatory regulations for certain contracts; second, among the various types of contract forms, which should be chosen as the means of regulation; third, how to evaluate the effectiveness of a contract if it lacks the statutory form. The purpose orientation of formal mandatory regulations is at the core of these three fundamental issues. When (legislators) decide whether a legal act should be subject to formal mandatory regulations, they should consider what purpose they wish to achieve and whether the statutory form can fulfill that function. When deciding the form in which a legal act should be created, they should consider the functions of each different form. When evaluating the legal effects of a statutory form deficiency, they should consider the purpose pursued through formal mandatory regulations and how the legal effect evaluation can appropriately express the "dissatisfaction" of the (legislators) when the purpose is not met. This book conducts research around the fundamental issues of formal contracts. The full text is divided into four chapters:
1. The Roman Law Foundation of Contract Forms and Its Modern Development
2. The Contemporary Face and Dilemmas of Formal Contracts
3. Rectification of Formal Contract Deficiency: The Theory of Performance Cure
4. Limited Application and Breakthrough of Formal Contract Deficiency
Chapter 1 discusses the Roman Law Foundation of Contract Forms and Its Modern Development. It briefly outlines the brief history of the concept and institution of contract forms, analyzing how the essence of contract forms evolved from classical Roman law, where form was considered the very act of the legal act, to merely a factor influencing the effectiveness of the contract outside of agreement. In the early period of Roman law, formal acts such as "nux," "formal sales," and "stipulatio" were ways to obtain ownership and were included in the section on "ownership and possession" in the "Twelve Tables." During the classical period, when the concept of "contract" was separated from the idea of a property "transfer," and when "obligatus" shifted from a substantive restraint on the person to an abstract, conceptual restraint, creditors had to perform certain rituals to ensure the legal restraint. The binding force of the contract could only arise from acts that met certain formal requirements. Formal oral agreements and written contracts, as typical formal contracts, showed the strict formalism of Roman law. Agreements based on ( - physical objects) and agreements based on ( - agreement) were exceptions to formalism due to type legalization and limitations on their effectiveness. By the post-classical period, when formal oral agreements completely lost their typical question-and-answer oral form and evolved into simple agreements based on the intention to form a formal oral agreement between the parties present, the strict formalism upheld by classical Roman law began to decline. With the rise of non-formal contracts and the growth of simplification, the basis of the effectiveness of all contractual debts shifted from a certain manner or ritual to the agreement between the parties. At this point, the essence of the manner changed, separating from the act and becoming merely an "additional requirement" for the act to become effective. Medieval canon law expanded the scope of agreements based on ( - agreement), considering a promise to be a matter of conscience and not requiring a special form (a person's words constituted the contract), as the basis and source of the contract's effectiveness. Every promise, regardless of its form, was binding (pactasunt servanda, agreements must be kept). Based on this, the post-Glossator school developed the theory of agreement in contracts, where "a simple agreement constitutes a debt" became the foundation of a new contract system and ultimately formed a unified concept of contracts that was free from statutory form constraints. Medieval canon law and Roman law scholars developed new doctrines that finally sounded the dirge of contract formalism. In modern law, the freedom of contract, as the core content of private legal autonomy, emphasizes that the binding force of the contract lies in the mutual intention or will of the two parties. Guided by the principle of contract freedom, laws in various countries have broken free from the shackles of formalism and generally adopted the principle of consent. According to this principle, a contract is established by the convergence of expressions of intent, and the legal effect of the contract directly originates from the free will of the parties. Specific form requirements are merely exceptions. The principle of contract form freedom, widely recognized in modern contract law, has, after more than a hundred years of practice, played a positive role in developing humanistic ethical views and promoting the development of the market economy, and is still followed by modern contract law. Since the mid-20th century, modern contract law theory has re-evaluated the value of formalism, leading to two interesting trends in the legislative regulation of contract forms. First, some countries have begun to re-emphasize the many values and functions of contract forms, such as evidence, fraud prevention, warning, and providing transaction information. More and more contracts are required to be "supposed to" in written form, especially those used to protect consumers or the weaker party in a transaction. The principle of contract form freedom has been appropriately restricted, and the form of contracts has taken a turn for the better, which scholars call the "revival of formalism." However, formal contract mandatory regulations remain an exception to the principle of contract form freedom; they are merely a tool for (legislators) to meet certain purposes and legal policies, and their nature has evolved from "efficacy form" to "protective form" or "purpose-oriented form." Second, international contract law still adheres to the principle of contract form freedom. The 1980 《》(United Nations Convention on Contracts for the International Sale of Goods), the 1994 《》(General Principles of Commercial Contracts) (revised in 2004), and the 1998 《》(Principles of European Contract Law) all adopt the "no form requirement" principle, not requiring contracts to be concluded or proven in a specific form. It can be proven in any form, including testimony.
Chapter 2 discusses the Contemporary Face and Dilemmas of Formal Contracts. This book first analyzes the diverse functions and essential purpose of formal contracts. The reason why contemporary law requires certain contracts to have a specific form is because (legislators) wish to use form to achieve certain purposes. Initially, the purpose was mainly focused on the evidentiary function of form, but later, the role of form in the legal order was no longer limited to evidence and had diversified functions, mainly including: evidentiary function, warning function, transparency and information-provision function, differentiation function, and other functions (such as facilitating the review and management of certain specific contracts). The purpose of form regulations is to protect the interests of one party, or to protect a public interest, or to protect the interest of a third party in having this legal relationship be clear and open. When interpreting form regulations, whether the purpose pursued by the (legislators) is legitimate and whether formal mandatory regulations can achieve the legislative purpose is a major theoretical issue worth further examination. Otherwise, if formal mandatory regulations are implemented merely for the purpose of achieving a certain function of contract form, it will shake the foundation of contract freedom and private legal autonomy, and thus it is necessary to carefully balance the conflict between formal mandatory regulations and contract freedom. This book analyzes the correspondence between the purpose of formal contracts and formal mandatory regulations one by one to illustrate under what circumstances the implementation of formal mandatory regulations is justified. "Protecting the interests of the parties" is one of the most important reasons to support formal mandatory regulations. The function of formal mandatory regulations in protecting the interests of the parties mainly includes three aspects: preserving evidence, urging parties to be cautious in transactions, and information transparency, as well as explanatory functions. These functions only involve the private interests of the contracting parties and have no direct connection with the public interests of the state and society or the interests of third parties. For such regulatory purposes, it is not appropriate to adopt formal mandatory regulations but should be achieved through advisory regulations, which merely advocate and encourage contracting parties to adopt specific behavioral models in order to maximize their own interests, similar to warning signs for drivers and pedestrians on dangerous roads. Otherwise, if formal mandatory regulations are implemented merely to protect the interests of the contracting parties, it will inevitably deviate from the concept of private legal autonomy. In addition, the compliance with statutory forms may, to some extent, protect the interests of third parties, but its connection with the statutory form mandatory regulation is extremely weak and it is difficult to form a convincing argument. Generally speaking, only when the contractual relationship involves social public interests beyond the mere competition of party interests is it necessary to introduce specific form requirements, reflecting the law's respect for social public interests. The analysis of the relationship between the purpose of formal contracts and formal mandatory regulations shows that in modern society, the issue is no longer whether to limit contract form freedom but within what scope, to what extent, and in what form to limit contract form freedom. Although the abstract reasoning is somewhat "persuasive," when faced with whether to implement formal mandatory regulations for a specific type of contract, the judgment standard still appears too vague and lacks operability. Here, this book attempts to introduce the proportionality principle from the field of public law, which may help solve this difficult problem. The proportionality principle, in terms of its function, reflects balanced justice, that is, using the balance between purpose and means to (reflect the justice of law). According to this rational thinking rule, formal mandatory regulations should be verified from three aspects: (1) the legitimacy of the purpose of formal contracts; (2) the necessity of formal mandatory regulations; (3) the proportionality between the purpose of formal contracts and formal mandatory regulations, that is, it is necessary to consider whether the sanctions for the deficiency of formal contracts are not proportional to the degree of achieving the purpose. Due to the diversification of the purpose of formal contracts, a single regulation model of contract non-formation or contract invalidity in the legal effect evaluation of the deficiency of formal contracts is inappropriate. Based on the above theoretical analysis, this book then observes the scope of application and form selection of formal contracts in comparative law, including common law, civil law systems (with German and French law as the main observation objects), and Chinese law, discussing the difficulties faced by formal mandatory regulations. From the perspective of comparative law, it can be seen that the scope of application of statutory forms varies greatly among different countries, reflecting the differences in the understanding of the purpose and function of formal contracts among different countries. In the current legal systems, the form required for contracts to be expressed in a specific form is mainly written form. In transactions where one party is a consumer or in a weak position, the consumer or weaker party particularly needs the disclosure of certain transaction information. Therefore, if the relevant formal regulations merely require that contracts be concluded in written form but do not further require that the written form record certain basic matters, it will not help the consumer or weaker party to identify the rights and obligations in the transaction. In this regard, some countries require the adoption of standardized model contracts for these contracts, and the parties merely accept or reject these terms in a general manner. If individual terms are to be excluded, they must be negotiated individually. These model contracts are formulated or approved by the government and officially published, fully considering the interests of consumers. In the selection of contract form types, the 《》(Contract Law) of China still has a special problem: whether registration and approval forms should be forms of the contract? Regarding registration, the Chinese civil law doctrine has correctly pointed out the essential difference between the form of creditor contracts and the methods of property transfer and property publicity. The current legal provisions on registration should be forms of property transfer or property publicity. However, they ignore the discussion of whether creditor contracts themselves should be formal contracts and what form should be adopted. This book believes that immovable property contracts should be formal contracts, otherwise the regulatory purpose of property transfer publicity cannot be achieved, but registration is a method of property transfer of immovable property and is not suitable to be the form of immovable property contracts at the same time. Written form should be adopted as the statutory form of such contracts. As for approval, it is an administrative act under public law and is unrelated to the expressions of intent of the parties. It is not a form that expresses the content of the contract and thus does not belong to the category of contract forms but is only a factor affecting the effectiveness of the contract. In the end, this chapter observes the different regulatory models of the legal effects of violating formal provisions in the civil laws of various countries. Common law basically focuses on the evidentiary function of formal contracts and handles this issue in litigation. The consequence of the deficiency of formal contracts is not to make the contract invalid but to make it "not enforceable" (without the right to claim performance). German civil law emphasizes the cautious function of formal contracts and adopts invalidity as the regulatory means from the substantive law, and invalidity is the core of the evaluation of the effectiveness of the entire statutory form deficiency. French law distinguishes statutory forms into two basic cases: one is that compliance with certain forms is a prerequisite for the validity of the legal act; the other is that a legal act lacking form is valid, but the legal act cannot be proven in court or can only be proven through limited forms of proof. The 《》(Contract Law) of China has not made clear general provisions on the legal consequences of the deficiency of formal contracts, and relevant laws and administrative regulations have made various provisions on the effectiveness of the statutory forms of individual types of contracts, resulting in constant debates between theory and practice over the effectiveness of statutory forms of contracts, presenting a chaotic and contradictory evaluation state. This book analyzes the viewpoints proposed by Chinese scholars, such as the formation requirement theory, the effectiveness requirement theory, the evidentiary effect theory, the non-enforceability theory, the opposition effect theory, and the plural effect theory, and (believes) that the effect of violating statutory form provisions should be closely tied to the purpose pursued by each specific form provision. Since the form itself has multiple purposes and functions, the effect evaluation should be diversified, that is, statutory form regulations should be divided into advisory regulations and mandatory regulations. The violation of the former does not affect the formation and effectiveness of the contract, while the violation of the latter makes the contract invalid.
Chapter 3 discusses the Rectification of Formal Contract Deficiency. Due to the possibility that the purpose of form regulations may lose its regulatory necessity due to certain acts or facts, the strict application of form rules may lead to unfair consequences, and thus it is necessary to open a healing door for certain individual formal contracts, recognizing that under certain conditions, defects in contract form can be rectified. This is represented in the civil law system by the performance cure rule originating from the 《》(German Civil Code), and in the common law system by the famous "part performance principle." The focus of this chapter has three aspects: , the interpretation of the German doctrine on healing provisions. Since the mode of deficiency of performance cure in Article 36 of the 《》(Contract Law) is derived from German law, the study of its doctrine should be the follow-up work after legal reception. German civil law, on the issue of healing the deficiency of form, on the one hand, adopts invalidity as the single core evaluation of the legal effect of statutory form deficiency and refuses general healing provisions, on the other hand, it has formulated performance cure provisions for individual cases such as immovable property creditor contracts. German scholars have proposed theories such as the completion of the purpose of form, legal stability, and trust protection for the theoretical basis of this healing provision. German doctrine and practice adopt a rather cautious and conservative attitude towards the analogy application of healing provisions. The general view is that the healing provisions in the 《》(German Civil Code) regarding individual cases cannot be analogically applied as a whole, that is, the general principle of performance cure of form deficiency cannot be extracted from these individual healing provisions. Second, the discussion of the partial performance principle in common law. The observation value of the partial performance principle lies in its conceptual similarity to the healing provisions in German law and Chinese law. This book introduces the historical background, development process, and contemporary face of this principle. This part of the comparative law research will help to understand the significance of the full or partial performance of one or both parties in the effectiveness evaluation of statutory form deficiency. Third, the discussion of Article 36 of the 《》(Contract Law). After the promulgation of the 《》(Contract Law), how to understand the provisions of Article 36 has become the core issue of scholars debating the effectiveness of statutory forms of contracts. Based on the existing literature, there are mainly the following understandings of this article: contract formation theory, contract effectiveness theory, contract formation method theory, performance cure theory. This book believes that, from the semantic interpretation of the contract law provisions, this article is a provision for the deficiency of statutory contract forms, not a provision for the contract formation method, and the substance of this article should be interpreted as a special provision for the performance cure of form deficiency. However, Article 36 of the 《》(Contract Law) of China, although drawing on the performance cure provisions of the 《》(German Civil Code), differs from the 《》(German Civil Code) in terms of regulatory mode, adopting a general healing provision rather than being limited to individual types of formal contracts. This book (believes) that the adoption of a general healing provision by Article 36 of the 《》(Contract Law) is a wrong decision in legislative policy and should be re-examined. This is because when (legislators) decide to open a healing door for formal contracts, they must be very careful and prudent in balancing the conflict between formal mandatory regulations and form freedom, as well as between the trust interests of the parties and other social public interests. Otherwise, if a general principle is rashly established that performance can cure the deficiency of statutory form before the applicable conditions of performance cure are specified, it will inevitably lead to the result of undermining the function of statutory form regulations, thus constituting an "system violation" in the legal order and creating legal loopholes. This book proposes to reconstruct the performance cure provisions based on the theory of trust protection. The basis of the healing provision for the deficiency of formal contracts is not the completion of the purpose of form but trust protection. When one or both parties have completed the full or partial performance, compared with the pursuit of the purpose of form, the trust state after performance occupies a superior position and is more worthy of protection. The healing provision is a specific manifestation of the principle of trust protection in contract law. In terms of value judgment, the healing provision shows that the trust protection of the conditions of healing is more important than the achievement of the purpose of form. When the two conflict, the (legislators) tend to prefer trust protection and abandon the purpose pursued by the form regulations. However, whether trust is worth protecting needs to be measured by public interest and private interest. Performance cure can only be applied to formal contracts that do not harm public interests. This means that the 《》(Contract Law) of China should abandon the general provision on performance cure and only open a healing door for individual formal contracts.
Chapter 4 discusses the Limited Application and Breakthrough of Formal Contract Deficiency. Due to the often mixed multiple purposes behind form, the practice of a single main axis effect evaluation (such as the contract invalidity in German law) when the statutory form is lacking may lead to neglecting between multiple purposes or even result in sanctions that far exceed the reasonable evaluation that should be achieved by the failure to reach the regulatory purpose. In some cases, if the statutory rules are strictly applied, the results may be unacceptable, and this requires coordination between the legal predictability, stability, and the expectation of justice. For this, whether it is common law, French law, or German law, various principles or methods have been used to limit the core effect of statutory form deficiency. The most representative doctrines or principles are the good faith principle in German law and the principle of estoppel in common law. The Chinese civil law academia has always maintained a rather awkward "silence" on this issue, and the legal system in China, which is nearly empty in this field and urgently needs to adopt limiting measures for the invalidity of form, has great reference value for the theories or doctrines formed by the breakthrough of the strictness of form in German law and the principle of estoppel in common law. This chapter introduces the development process, important cases, theoretical interpretation, and future trends of the good faith principle in German law and the principle of estoppel in common law in breaking through the strictness of form. Through comparative research, this book believes that German law and common law have reached the same conclusion in many cases with similar facts, and from these cases and the relevant interpretations of the doctrines, two basic elements can be found: , one party of the party induces the other party to trust the existence or future existence of form; second, the other party of the party, based on this trust, makes some disposition or changes the original state, thereby placing itself in an unfavorable position. However, the emphasis of common law and German law on these elements seems to be different: common law clearly emphasizes the change in the position of the other party of the party, or what is called "detrimental reliance," while German law pays more attention to the non-accusatory evaluation of the party that causes the trust, that is, its evaluation focuses more on the degree of blameworthiness of the party. In addition, German law adopts a more cautious and conservative attitude in limiting the deficiency of form, which is mainly reflected in two aspects: , the requirement for the degree of accusation is higher, that is, in principle, one party must be malicious or severely violate the duty of good faith. Second, the degree of effort invested by the party that induces trust is higher, that is, it must reach the level of endangering survival. Common law focuses the evaluation on the change in the position of the party that trusts, which is very consistent with the trend of incorporating the principle of estoppel into the principle of part performance in this legal system. Because, from a certain point of view, the party that has completed a part or all of the performance has also changed its original position and has therefore fallen into an unfavorable position. Some German doctrines have been influenced by the above trend of common law and believe that the basis of healing provisions in German law is trust protection. This argument will inevitably shake the traditional view of German law, which focuses on blameworthiness evaluation when limiting the invalidity of form, and will inevitably loosen the originally cautious attitude of German law on this issue. If the (elements for inspection) of the good faith principle in German law in limiting the invalidity of form is adjusted in the direction of the requirements of healing provisions, then the traditional requirement of blameworthiness will necessarily correspondingly be reduced. This shift in evaluation focus will bring the positions of German law and common law closer together. Based on a comprehensive observation and analysis of the relevant cases and scholars' views in German law and common law, this book discusses the necessity of limiting the invalidity of form with the good faith principle in Chinese law, and (believes) that the application of the extremely abstract and general legal principle of good faith to the breakthrough of statutory forms of contracts must consider the following two factors: , in terms of methodology, priority should be given to the protection provided by various specific request base theories with more concrete constitutive elements and legal effects; second, the establishment of types and inspection elements to avoid the application of the good faith principle flowing into uncertain concepts of fairness and justice, thereby severely damaging legal stability. This book (believes) that the relevant application in Chinese law should consider three basic inspection elements: , one party of the party trusts the contract to be valid; second, the party that trusts changes its original property status based on the trust (that is, trust-based disposition); third, the other party knows or should know the deficiency of form and encourages the party that trusts to change the original state, or the party that causes the trust ignores the change of the original state, which is particularly likely to occur when one party has rich trading experience. If this party calculates from the beginning to use the deficiency of form to place themselves in a state where they can change their minds at any time, it should constitute malice. Even if not malicious, if the party accepts the performance of the other party or ignores the change of the original state of the other party, this act or inaction will further strengthen the trust of the other party in the contract being valid, and thus may also constitute an element. It is worth noting that the elements used to test the limitation of the invalidity of form with the good faith principle are not closed and fixed, and a certain degree of flexibility should be given in practical application, and it is still necessary to determine the case-by-case facts. Its specificization and typification still depend on the accumulation of relevant cases in Chinese practice.