Termination of contract
合同的终止
A breach of contract is committed when a
party without lawful excuse fails or refuses to
perform what is due from him under the
contract, or performs defectively or
incapacitates himself from performing.
breach of contract
The doctrine of compensation
The doctrine of limitations on damages
General principles of remedies
The doctrine of expectation interest 期待利益
The doctrine of reliance interest信赖利益
The doctrine of restitution interest 无偿得利
Doctrine of compensation
Both parties at the time of the conclusion of a
contract have expectation interest over the
contract, and the injured party is entitled to
his expectation interest lost by the party in
breach.
Courts ordinarily protect the expectation that
the injured party had when making the
contract by attempting to put the injured
party in as good a position as that party
would have been in had the contract been
performed, that is, had there been no breach.
Doctrine of expectation interest
When the defendant’s promise to perform his
contractual obligations, the claimant has
acted to his detriment in entering into the
contract and the award of damages should
compensate the defendant.
To put the claimant in as good a position as
he was in before the defendant’s promise was
made.
Doctrine of reliance interest
A claimant who claims the protection of his
restitution interest does not wish to be
compensated for the loss which he has
suffered; rather, he wishes to deprive the
defendant of a gain which he has made at the
claimant’s expense.
See example on p. 116
Doctrine of restitution interest
Non-breaching party has the duty to mitigate
damage.
Damages must be established with a
reasonable degree of certainty. 1
Damages must be either foreseeable to the
breaching party or would naturally flow from
the breach. Hadley v. Baxendale.
Prutch v. Ford Motor Company. p117
Doctrine of limitations on damages
Specific performance
Avoidance
Price reduction
Refusing early delivery and excess quantity
Buyer’s remedies
Failing to make an agreed delivery
Delivering goods that do not conform to the
contract
Indicating an intention not to fulfill the
obligations under the contract.
Ways of breach by the seller:
A court requires a party to the contract to
perform, or carry out its part of the bargain.
Often used when the subject matter of the
contract is unique.
Specific performance
If the breach is material or fundamental, the
buyer need not take delivery nor pay for the
goods, nor find a buyer to take them.
A buyer may simply cancel the contract by
notifying the seller of avoidance of the
contract, take care that the goods are
temporarily protected and preserved, and
return them for a full refund of monies
already paid.
Avoidance
Used when the seller makes only a partial
shipment, or if the goods are nonconforming.
Price reduction
The buyer is entitled to do this.(reason?)
If the buyer takes delivery of all or part of the
excess quantity, he must pay for it at the
contract rate.
Refusing early delivery and excess
quantity
To compel specific performance
To avoid the contract for a fundamental
breach or failure to cure a defect
To obtain missing specifications
Seller’s remedies
Remedies available to both buyers and
sellers
Suspension of performance
Avoidance in anticipation of a fundamental
breach
Avoidance of an installment contract
Avoidance
damages
damages
The usual remedy granted by common law
courts to both buyers and sellers is the legal
remedy of money damages.
Price of Substitute goods-price of contract
goods=damage
Current market price-contract price=damage
中国《合同法》
第一百一十二条 当事人一方不履行合同义务或者履行合同
义务不符合约定的，在履行义务或者采取补救措施后，对方
还有其他损失的，应当赔偿损失。
第一百一十三条 当事人一方不履行合同义务或者履行合同
义务不符合约定，给对方造成损失的，损失赔偿额应当相当
于因违约所造成的损失，包括合同履行后可以获得的利益，
但不得超过违反合同一方订立合同时预见到或者应当预见到
的因违反合同可能造成的损失。
经营者对消费者提供商品或者服务有欺诈行为的，依照《中
华人民共和国消费者权益保护法》的规定承担损害赔偿责任。
中国《合同法》
第一百一十九条 当事人一方违约后，对方应当采
取适当措施防止损失的扩大；没有采取适当措施致
使损失扩大的，不得就扩大的损失要求赔偿。
当事人因防止损失扩大而支出的合理费用，由违约
方承担。
Avoidance of installment contracts
If there was a fundamental breach with
respect to a particular installment, then the
other party may declare the contract avoided
with respect to that installment.
If the breach of one installment gives a party
“good grounds” to believe that a fundamental
breach of later installments will occur, then
those later installments may be anticipatory
avoided.
Anticipatory breach of contract
预期违约
One contracting party may inform the other
party, before the time fixed for performance
under the contract, that he will not perform
his obligations under the contract.
Acceptance of the breach entitles the
innocent party to claim damages at the date
of the acceptance of the breach.
Hochster v. De La Tour p128
Exemption of one party’s obligation in case of
the other party’s failure of performance.
One party is entitled to reject performance
unless the other party performs his
obligations according to the contract.
Exceptio non adimoleti contractus
PICC .:
“(1) where the parties are to perform
simultaneously, either party may withhold
performance until the first party has
performed.
(2) where the parties are to perform
consecutively, the party that is to perform
later may withhold its performance until the
first party has performed.”
Exceptio non adimoleti contractus
第六十六条 当事人互负债务，没有先后履行顺序的，应当同时履行。
一方在对方履行之前有权拒绝其履行要求。一方在对方履行债务不符
合约定时，有权拒绝其相应的履行要求。
第六十八条 应当先履行债务的当事人，有确切证据证明对方有下列
情形之一的，可以中止履行：
（一）经营状况严重恶化；
（二）转移财产、抽逃资金，以逃避债务；
（三）丧失商业信誉；
（四）有丧失或者可能丧失履行债务能力的其他情形。
当事人没有确切证据中止履行的，应当承担违约责任。
第六十九条 当事人依照本法第六十八条的规定中止履行的，应当及
时通知对方。对方提供适当担保时，应当恢复履行。中止履行后，对
方在合理期限内未恢复履行能力并且未提供适当担保的，中止履行的
一方可以解除合同。
Chinese contract law
Amount of money which shall be payable in
the event of a breach of contract.
Eliminate uncertainty because it enables the
parties to know in advance the extent of
their petential liability and to plan
accordingly.
To fix the sum which is to be paid
irrespective of the actual damage suffered
by reason of the breach.
The sum stipulated in the liquidated
damages clause is the sum recoverable,
even though that sum is greater or smaller
than the loss which has actually been
suffered.
Liquidated damages
Penalty clause aims to punish the party in
breach, while liquidated damage is to provide
remedy.
A penalty clause is invalid and unenforceable,
while the other one is valid and enforceable.
Liquidated damage v. penalty
It is the court to distinguish the two kinds
of clauses by using of construction rules:
(1) if the sum stipulated for is extravagant
and unconscionable in amount in
comparison with the greatest loss that
could conceivably be proved ;
(2) if the sum stipulated is greater than the
sum ought to have been paid;
(3) when a single lump sum is payable by
way of compensation, on the occurrence of
one or more or all of several events, some
of which may occasion serious and others
but trifling damage.
Construction rules
Civil law:
German law: even if characterized by
punitive role is valid and enforceable.
PICC. Art. :
“(2) notwithstanding any agreement to the
contrary the specified sum may be reduced
to a reasonable amount where it is grossly
excessive in relation to the harm reslting
from the non-performance and to the other
circumstances.”
Liquidated damages
第一百一十四条 当事人可以约定一方违约时应
当根据违约情况向对方支付一定数额的违约金，
也可以约定因违约产生的损失赔偿额的计算方法。
约定的违约金低于造成的损失的，当事人可以请
求人民法院或者仲裁机构予以增加；约定的违约
金过分高于造成的损失的，当事人可以请求人民
法院或者仲裁机构予以适当减少。
当事人就迟延履行约定违约金的，违约方支付违
约金后，还应当履行债务。
Chinese contract law
Seller’s obligaiton
Buyer’s obligation
Obligation of the seller and the
buyer
Delivery of goods
The turning over of documents
The seller’s assurance of the quality of goods
The seller’s assurance of the ownership of the
goods
Seller’s obligaiton
Delivery is voluntary transfer of possession
from one person to another.
It may be actual or constructive.
when the goods are not delivered,
but the means of obtaining possession of the
goods is delivered.
Delivery of goods
CISG. Art. 31,
Place of delivery
Time for delivery
p 142--143
Delivery of goods
Sale of Goods Act 1973 (Art. 12--15)
The UCC
CISG
p 143--145
The seller’s assurance of the quality
of goods
SGA: the goods are free, and will remain
free untill the time when the property is to
pass, from any charge or encumbrance not
disclosed or known to the buyer before the
contract is made, and the buyer will enjoy
quiet possession of the goods.
CISG: free from patent, trademark, and
copyright claims assertable under the law of
the buyer’s “place of business” or the place
where both parties expect the goods to be
used or resold.
The seller’s assurance of ownership
of the goods
Payment of the price
Taking delivery
Buyer’s obligations
SGA: buyer’s obligaiton to accept the goods is
integrated with his right to examine the
goods.
Payment of the price
CISG. Art. 60: to cooperate with the seller to
facilitate the transfer and to actually take over
the goods, if the buyer fails to cooperate, he
will be responsible for any resulting costs,
and if he fails to take delivery he assumes the
risk for any damage to the goods after that
time.
The Natural Gas Case, p 140--143
Taking delivery
SGA: who bears the risk of loss, who has title
to the goods;
UCC
CISG
Passing of risk
CISG allows the parties to decide the time of
passing of risk
The effect of passing of risk
Where the goods need to be moved
The passing of risk of the goods in transit
Fundamental breach of contract’s effect on
the passing of risk 1
CISG
第一百四十二条 标的物毁损、灭失的风险，在标的物交
付之前由出卖人承担，交付之后由买受人承担，但法律另
有规定或者当事人另有约定的除外。
第一百四十三条 因买受人的原因致使标的物不能按照约
定的期限交付的，买受人应当自违反约定之日起承担标的
物毁损、灭失的风险。
第一百四十四条 出卖人出卖交由承运人运输的在途标的
物，除当事人另有约定的以外，毁损、灭失的风险自合同
成立时起由买受人承担。
第一百四十五条 当事人没有约定交付地点或者约定不明
确，依照本法第一百四十一条第二款第一项的规定标的物
需要运输的，出卖人将标的物交付给第一承运人后，标的
物毁损、灭失的风险由买受人承担。
Chinese contract law
第一百四十六条 出卖人按照约定或者依照本法第一百四
十一条第二款第二项的规定将标的物置于交付地点，买受
人违反约定没有收取的，标的物毁损、灭失的风险自违反
约定之日起由买受人承担。
第一百四十七条 出卖人按照约定未交付有关标的物的单
证和资料的，不影响标的物毁损、灭失风险的转移。
第一百四十八条 因标的物质量不符合质量要求，致使不
能实现合同目的的，买受人可以拒绝接受标的物或者解除
合同。买受人拒绝接受标的物或者解除合同的，标的物毁
损、灭失的风险由出卖人承担。
第一百四十九条 标的物毁损、灭失的风险由买受人承担
的，不影响因出卖人履行债务不符合约定，买受人要求其
承担违约责任的权利。
Chinese contract law
Passing of ownership of the contract
SGA: p 147-148
1. specific goods
2. unascertained goods
Passing of property
第一百三十三条 标的物的所有权自标的物交付时
起转移，但法律另有规定或者当事人另有约定的除
外。
Chinese contract law
Common law:
Impossibility of performance
Supervening illegality
Frustration of purpose
Commercial impracticability
Excuses for non-performance
履行不能
A court may excuse a party’s nonperformance
where it becomes objectively impossible for
it to perform.
The death of one of the parties
The destruction of the specific subject
matter of the contract
When performance of the contract has been
rendered illegal or made impossible due to
the fault of the other party.
Impossibility of performance
Supervening illegality
A contract becomes impossible to perform and
the parties excused when performance becomes
illegal.
See example on
Frustration of purpose
A party’s performance could be excused if some
unforeseen event occurred that frustrated the
purposes of the contract.
Frustration occurs whenever the law recognizes that
without default of either party, a contractual
obligation has become incapable of being performed
because the circumstances in which performance is
called for would render it a thing radically different
from that which was undertaken by the contract.
Knell v. Henry
Commercial impracticability
A thing is impossible in legal contemplation
when it is not practicable; and a thing is
impracticable when it can be done only at an
excessive and unreasonable cost.
If the event was foreseeable, the non-
performing party will not be released from its
obligations. See examples on : p152
Transatlantic Financing Corporation v. United
States p 153
PICC: p 164
CISG: p 165
Excuses for non-performance
A force majeure clause in a contract is an
exculpatory clause, it excuses a party from
failing to perform on the occurrence of an
event specified in the clause itself—a force
majeure.
These events might include war, blockades,
fire, acts of governments, inability to obtain
export licenses, acts of public enemies,
failure of transportation, quarantine
restrictions, strikes and others.
Force Majeure clauses
Model in common law countries: p 156
Recommended models for Chinese merchants
in book: p 156
Force Majeure clauses
