Article 11: Where one of the parties is a natural person, and based on the party's age, intelligence, knowledge, and experience, combined with the complexity of the transaction, it can be determined that it lacks due cognitive capacity for the nature of the contract, the legal consequences of the conclusion of the contract, or the specific risks existing in the transaction, the people's court may find that such situation constitutes a "lack of judgment capacity" as provided for in article 151 of the Civil Code.
【Purpose of the Article】
This article is a specific provision on the circumstances of "lack of judgment capacity" that make civil juristic acts manifestly unfair, and sets out the corresponding criteria for determining what constitutes "lack of judgment capacity" in an outlined manner.
【Overview of Provisions】
Article 151 of the Civil Code stipulates that: "Where one party takes advantage of the other party's distress or lack of judgment ability, etc., resulting in the civil juristic act being obviously unfair when it is established, the injured party has the right to request the people's court or arbitration institution to revoke it." Thus, the question arises as to how to determine "in a state of distress" and how to determine "lack of judgment".
It is worth noting that although the provisions of Article 151 of the Civil Code on obvious unfairness are directly derived from Article 151 of the General Provisions of the Civil Law, this article actually integrates the two legal acts with defective expressions of intent stipulated in Article 59 of the General Principles of the Civil Law and Article 54 of the Contract Law. In the context of the General Principles of the Civil Law, this "means that the legislator has adopted the mainstream opinions of the academic community". The reason why the "General Principles of the Civil Law" adopted this kind of dualistic legislation at that time was because the leading ideology of legislation at that time emphasized the "principle of combining law and morality", required the civil law to serve the construction of material and spiritual civilization, and stipulated that legal acts that seriously violated the socialist moral norms were invalid. After all, taking advantage of the danger of others can be described as a serious violation of the socialist moral norm, while obvious unfairness does not necessarily involve moral standards, so Article 59 of the General Principles of the Civil Law only stipulates that civil acts of "major misunderstanding" and "obvious unfairness" can be changed or revoked, while "taking advantage of the danger of others" is stipulated in Article 58 of the General Principles of the Civil Law as one of the circumstances of invalid civil acts. In response to the provisions of the General Principles of the Civil Law, the subsequent Opinions on the General Principles of the Civil Law have made separate provisions on the danger of taking advantage of others and the obvious unfairness. Subsequently, the Contract Law proposed that excessive state interference in private autonomy should be restricted, and article 54 regarded "a contract concluded by one party by means of fraud, coercion or taking advantage of the danger of others to cause the other party to enter into a contract contrary to its true intentions" as a contract that could be modified or revoked, and would no longer be regarded as invalid. However, the reform of the Contract Law is not yet complete, and although they are all contracts that can be changed or revoked, "material misunderstanding" and "obvious unfairness" are the two items in Article 54, Paragraph 1, and "taking advantage of the danger of others" is listed as a separate paragraph in Article 54, Paragraph 2, and the legislative model of dichotomy is still retained in form. It was not until the General Provisions of the Civil Law that this legislative system was broken down, integrating taking advantage of the danger of others as a cause of obvious unfairness, retaining manifest unfairness as a revocable cause of legal acts, and deleting the legal effect that could be modified. Article 151 of the Civil Code thus continues the aforesaid provisions of the General Provisions of the Civil Code.
As for how to determine "in a state of distress" and "lack of judgment ability", the former can obviously continue to refer to the criteria for determining the danger of taking advantage of others, while the latter has not been covered in previous legal provisions and judicial interpretations. For the first time, this article of this judicial interpretation explicitly stipulates "lack of judgment ability".
【Controversial Views】
In the case that one of the perpetrators has full capacity for civil conduct, can it also be determined that it constitutes a "lack of judgment capacity"? Once it is found to constitute a "lack of judgment capacity", can the perpetrator claim be revoked on the grounds of manifest unfairness in accordance with Article 151 of the Civil Code? If the perpetrator is only relatively young and naïve, lacks social experience, and cannot withstand persuasion and inducement, can it also be found to be "lacking judgment ability"? There are different understandings of the above issues in practice.
[Understanding and Application]
1. The subject of "lack of judgment ability" can only be natural persons
This article is in fact an interpretation of the subjective element facts and the subjective element facts that constitute manifestly unfair. The Roman Empire abandoned the strict formalism requirements of early Roman law for contracts, stipulating that if the price of land sold is less than half of the fair market price, the seller can demand the termination of the contract on the grounds of "extraordinary loss", regardless of whether the buyer has resorted to fraud or coercion. Later, common law developed a system of manifest unfairness (also known as unconscionability) in equity, which held that if a contract was "manifestly unfair" to the point of "touching the conscience of the judge", the contract could not be enforced in equity. In the civil law system, the rule of extraordinary loss under French law and the windfall rule in German law have been developed, and the manifest unfair regime in civil law is "very similar to the profiteering in German law", and the windfall in German law is provided for in § 138 paragraph 2 of the German Civil Code.
As far as the subjective element facts are concerned, in order to constitute manifest unfairness, two requirements must be met at the same time: (1) the injured party is in a state of distress or lacks the ability to judge; (2) The favorable party intentionally takes advantage of the unfavorable situation. However, the subject subjectively "lacking judgment ability" can obviously only be a natural person, and cannot be a legal person. This is because a legal person is an organization that has the capacity for civil rights and civil conduct, and independently enjoys civil rights and bears civil obligations in accordance with the law. Therefore, it is true that the legal representative and shareholders of the individual, as individuals, may "lack the ability to make judgments" subjectively, but it cannot be said that the shareholders' meeting and the board of directors of the organization, as institutions, also "lack the ability to make judgments" subjectively. In our view, the determination of the subject that constitutes a "lack of judgment ability" as provided for in Article 151 of the Civil Code must be strictly limited to natural persons, and cannot be abused to legal persons, so as to avoid legal persons from passing on the risks of their normal business decisions.
2. The time point for judging "lack of judgment ability" is the time when the civil juristic act is established
The purpose of determining "lack of judgment ability" is to ascertain whether the subjective elements of the facts constituting obvious unfairness have been met, and according to Article 151 of the Civil Code, only when "it is obviously unfair when the civil juristic act is established" can the injured party have the right to exercise the right of revocation to request revocation. In other words, if there is no "lack of judgment capacity" at the time of the establishment of the civil juristic act, but only the lack of judgment capacity corresponding to the civil juristic act before or after the establishment of the civil juristic act, since it has no effect on whether it constitutes obvious unfairness, it is meaningless to examine whether there is a "lack of judgment capacity" at this time. For example, for a period of time, some elderly people went to the bank to make deposits, but under the inducement of individual staff members, they purchased wealth management insurance or other fund wealth management products, and only found that they only held insurance policies or wealth management product contracts when they had completed the purchase or even needed to withdraw their deposits. In this case, the "lack of judgment ability" when the depositor has already known that he or she is purchasing insurance or wealth management products and negates the behavior cannot be corrected by improving the cognitive ability after the fact.
In addition, "lack of judgment capacity refers to the ability of the actor to carry out a civil juristic act or to correctly judge the economic consequences of the payment and civil juristic act by the parties due to a clear lack of rational consideration". Some scholars believe that the lack of judgment ability refers to "the inability to clearly recognize the impact of the act on one's own interests when disposing of one's own rights due to one's own special reasons". Some scholars believe that "the lack of judgment ability in Article 151 of the General Provisions of the Civil Law is the lack of rational cognition of the consequences of civil juristic acts, especially the relationship between payment and treatment". Therefore, although this article stipulates various factors to be considered, such as "the nature of the contract, the legal consequences of the conclusion of the contract, or the specific risks existing in the transaction", the focus of the judgment on the lack of judgment ability is still the ability to make rational judgments between civil juristic acts and legal consequences. For example, investors in some small and medium-sized enterprises do not have special knowledge of venture capital, and are lured by the idea of "getting rich overnight" when the company will be listed on the "New Third Board" in the future, and sign a "VAM" agreement with venture capital institutions for valuation adjustment. In our view, the assessment of whether there is a lack of judgment capacity depends on whether the actor can rationally judge the consequences of the VAM when entering into a VAM agreement. As for the fact that the actor improved his cognitive ability through learning after the fact, it did not affect the fact that he lacked the ability to judge when entering into the VAM agreement.
3. Manifest unfairness arising from "lack of judgment ability" requires the use of the counterparty
As mentioned above, to constitute manifest unfairness, it is necessary not only to satisfy the conditions of the unfavorable situation, such as the injured party's precarious situation or lack of judgment, but also to have the beneficial party intentionally taking advantage of the disadvantageous situation. According to Article 151 of the Civil Code, there must also be a situation in which "one party takes advantage" of the other party's lack of judgment or other disadvantage before the injured party can request the revocation of a civil juristic act on the ground of obvious unfairness. In other words, if it is only the actor's lack of judgment ability, and the other party does not know that it does not have the cognitive ability it should have, of course, it is impossible to "exploit" the unfavorable factor, so even if it can be determined that the actor lacks the ability to judge, it is of course impossible to constitute obvious unfairness because it lacks one of the two necessary conditions for constituting a manifest unfairness. For example, in the case of a dispute over a sales contract between Hu Mouhua and Yi Mouhua, the two parties formed a sales contract arrears of more than 280,000 yuan due to several batches of "antique" transactions, which were later identified by the relevant departments and found to be "antique handicrafts". In that case, the court held that "the parties traded a wide range of items, including the Qingming Shanghe Diagram and the Qianlong Panlong Sea Bowl. Even ordinary good people should know that the genuine products of these cultural relics cannot be circulated in the market, let alone sold for tens of thousands of yuan. Therefore, even if the buyer lacked the ability to judge the antique transaction in this case, since the seller did not have the subjective intention to take advantage of the other party's lack of cognitive ability, did not sell the counterfeit as genuine, and there was no evidence that the selling price clearly deviated from the fair market value, the buyer could not claim that the sales contract was rescinded on the ground of manifest unfairness merely because of its own lack of judgment.
[Practical issues]
1. Possession of full capacity for civil conduct is not a basis for denying "lack of judgment capacity".
In judicial practice, many judgments take the parties' full capacity for civil conduct as the basis for determining that they do not lack the ability to make judgments, so as to exclude the application of obvious unfairness. But we believe that this perception is wrong. The reason is that the system of obvious unfairness and civil capacity are different institutional structures, and if one has full capacity for civil conduct, it can be rebutted that there is no lack of judgment ability, then it is meaningless for Article 151 of the Civil Code to stipulate "lack of judgment ability" as one of the circumstances that constitute obvious unfairness. In fact, it is precisely because the actor does not have a lack of capacity to act that the law sets up a system of obvious unfairness to make up for it, so "it is precisely the civil subject who is not yet a person with limited capacity for civil conduct, but has a low ability to make judgments due to a certain degree of intellectual disability, that may be persuaded to enter into a clearly unfair contract, which should be regarded as one of the main situations of taking advantage of the lack of judgment ability to make obvious unfairness".
In practice, there are situations where the person has full capacity for civil conduct to judge whether there is a lack of judgment capacity, which may be due to the fact that the Opinions on the General Principles of the Civil Law use "lack of judgment ability" as the criterion for determining "inability to fully recognize one's own conduct". In fact, among all the laws and judicial interpretations so far, only Article 151 of the Civil Code, Article 151 of the General Provisions of the Civil Law and Article 5 of the Opinions on the General Principles of the Civil Law use the expression "lack of judgment ability", and the Opinions on the General Principles of the Civil Law are intended to interpret Article 13 of the General Principles of the Civil Law, which takes "lack of judgment and self-protection ability" on more complex or major issues as the criterion for identifying a mentally ill person who "cannot fully recognize his or her own behavior". It is further determined that such mentally ill persons are persons with limited capacity for civil conduct. In our view, there is indeed an overlap between "lack of judgment capacity" in determining whether it has full capacity for civil conduct and constitutes obvious unfairness, but there is still a certain degree of difference between the two. "Lack of judgment capacity" meets the standard of Article 5 of the Opinions on the General Principles of the Civil Law, and may be found to be a person with limited capacity for civil conduct, and his civil conduct shall be handled in accordance with the rule of lack of full capacity for civil conduct; On the contrary, on the premise that the actor has full capacity for civil conduct, it can also be examined whether it constitutes a "lack of judgment capacity" as provided for in Article 151 of the Civil Code, and if so, there may be an obvious application of the unfair system. In short, the "lack of judgment capacity" cannot be denied on the basis that the actor has full capacity for civil conduct, and the oversimplified judgment standard actually confuses the institutional function of the law, which will make the provisions of Article 151 of the Civil Code hollow out.
2. "Recklessness", "Significant Weakness of Will" and "Psychological Dependence" may lead to "lack of judgment ability"
As noted earlier, the manifest unfair regime of civil law in the civil law of the United States is "very similar to the profiteering in German law", while article 138 (2) of the German Civil Code, which provides for profiteering, provides for "imminent situation", "inexperience" and "manifest weakness" in addition to "lack of judgment (lack of judgment)". Article 151 of the Civil Code of the People's Republic of China provides for a catch-all provision of "situations such as being in a state of distress and lacking the ability to make judgments", which indicates that the reasons for obvious unfairness include but are not limited to these two situations, and there are other "and other circumstances", thus leaving a certain amount of flexibility for the application of this article.
We believe that the determination of "equivalent circumstances" should not only prevent judges from arbitrarily abusing their discretion in judicial practice, but also avoid being too rigid and self-contained. In practice, "rashness", "significantly weak-willedness", "inexperience", "psychological dependence", etc., may lead to a "lack of judgment ability" in essence. For example, under the guise of providing financial services for college students, the "online loans" and "campus loans" that have been rampant for a period of time have taken advantage of the fact that the student group is not deeply involved in the world to vigorously promote the so-called "credit card on campus", breaking through the scope and bottom line of campus online loans, and causing the problem of "job loans", "training loans", "business loans" and other bad loans in some places to become prominent, so that the regulators have to issue notices several times to rectify them. Another example is that in recent years, PUA (pick-up?artists, abbreviated as PUA, literally translated as "pick-up artists"), has become synonymous with malignant culture, and through "suppression" strategies such as verbal debasement, the other party will lower their self-confidence, so that the opposite sex will fall into temptation and obey their instructions, resulting in cognitive dissonance of the opposite sex in emotional anxiety, that is, the so-called "Stockholm effect" in psychology, so as to achieve the purpose of emotional manipulation. When one party has already caused the psychological dependence of the other party through PUA, and even reached the point where it can control the other party to "instigate suicide" or "encourage suicide", the resulting civil juristic acts can of course be revoked by applying Article 151 of the Civil Code to manifest unfairness. In short, the determination of "lack of judgment ability" should be open-minded, and as provided in this judicial interpretation, the parties' age, intelligence, knowledge, experience, and the complexity of the transaction should be comprehensively evaluated on whether they have the due cognitive ability to the nature of the contract, the legal consequences of the conclusion of the contract, or the specific risks existing in the transaction.
3. The "lack of judgment ability" can be divided into types
The so-called "judgment ability" is, in the final analysis, the subjective cognitive ability of the judgment subject to the judgment object, so the identification criteria of "lack of judgment ability" can be distinguished from the relationship between the judgment subject and the judgment object. It can be broadly divided into three categories.
First, in ordinary civil legal relations, since civil affairs originate from the life of civil society, the empirical rules of life should be used as the criterion for judgment, and it is not appropriate to take too much professional knowledge and specific transaction experience into account, otherwise it may lead to an overly broad scope of application of obvious unfairness. At the same time, the general life experience and transaction experience of the local society should be the main basis for determining the lack of judgment ability in civil activities.
Second, in a commercial transaction, since all commercial entities engaged in commercial activities should have reasonable expectations of the normal transaction risks of commercial activities, it should be presumed that they have the corresponding professional knowledge when engaging in such commercial activities. Even if the actor does in fact lack specific professional knowledge and transaction experience, it is not appropriate to easily determine that it is obviously unfair on the basis of "lack of judgment ability", so as not to affect the stability of transaction security in commercial transaction activities. The opinions of industry associations should be listened to, and the general perception of the industry should be used as the standard for determining "lack of judgment ability".
Third, with regard to consumer contracts, since the law should protect the rights and interests of consumers and impose heavier responsibilities and obligations on business operators, the criteria for determining consumers' "lack of judgment ability" should be relaxed when consumers are confronted with a wide variety of and dazzling transaction information provided by business operators. Some scholars have even proposed to solve the problem with the "relative incapacity" of consumers, but we believe that the legal effect of adopting a lower standard for determining "lack of judgment ability" for consumers in complex transactions is equivalent to that of "relative incapacity" of consumers.
Finally, it should be pointed out that the determination of "lack of judgment ability" is actually only one of the circumstances in the subjective constitutive elements of obvious unfairness, and whether it ultimately constitutes obvious unfairness depends on whether the subjective and objective facts are present at the same time. In other words, if the essential facts on the one hand are particularly sufficient, the requirements for the essential facts on the other side can be lowered. The High Court of Stuttgart in Germany created the "sand pile principle" in a precedent, and the District Court of Washington State in the United States also proposed a "sliding scale" relationship in its precedents, which means that the objective constituent elements (obvious disproportionate relationship) have been "exceeded" to the point of "being established to a particularly significant extent", then the excessive requirements for the subjective constituent elements are "unnecessary", that is, "when the elements of one party are highly sufficient, they can compensate for the insufficiency of the elements of the other party". Even the extreme gravity of the objective (substantial) element facts may render the judgement of whether the subjective (procedural) element is met no longer necessary". [27] In our view, these theories can be used as a reference in judicial practice, especially when the objective elements of obvious unfairness have reached the level of self-evident apparentness, and the subjective constituent elements such as "lack of judgment ability" should not be rigidly insisted on. If it is indeed impossible to fully apply the provisions of Article 151 of the Civil Code in the application of specific laws, the principle of fairness in Article 6 of the Civil Code, which is the superior legal provision, may also be applied. Because the basic principles of civil law are overarching, the application of all specific legal provisions must not be contrary to the basic principles of the Civil Code.