Article 8: Where, after the reservation contract takes effect, one of the parties fails to perform its obligation to conclude this contract, and the other party requests compensation for the losses caused thereby, the people's court shall support it in accordance with law.
Where the parties have agreed on compensation for the losses provided for in the preceding paragraph, follow the agreement; If there is no agreement, the people's court shall make a decision based on factors such as the completeness of the content of the reservation contract and the degree of fulfillment of the conditions for entering into this contract.
【Purpose of the Article】
This article is about liability for breach of contract for breach of contract.
【Overview of Provisions】
With regard to liability for breach of contract for breach of advance contract, there have always been two different views: the theory that consultation should be held and the theory that contract must be concluded. The former aims to implement autonomy of will, holding that the reservation contract only creates an obligation to continue negotiation, and cannot compel the parties to enter into this contract; The latter aims to prevent dishonest conduct, holding that the pre-contract can produce the effect of intention to compel the contract, and the judgment of the court can replace the intention of the parties and give the effect of enforcement. This article does not clearly stipulate whether a party can take the remedy of compulsory performance for breach of the reservation contract, and only provides for compensation for the loss of breach of the reservation contract, mainly considering that the Civil Enforcement Law is still in the process of drafting, and the current law does not provide for the enforcement of the expression of intent. In addition, how to calculate the amount of damages for breach of the reservation contract is also a difficult problem to solve in practice. One view is that, in order to highlight the difference between the reservation contract and the contract, the amount of damages for breach of the reservation contract can be calculated by referring to the trust interest of the contract. Another view is that, in order to protect the reasonable expectations of the parties, the amount of damages for breach of the advance contract can be calculated by referring to the performance interest of the contract. In our view, on the one hand, calculating the amount of damages for breach of the reservation contract by referring to the reliance interest of this contract may lead to the loss of the function of the reservation contract, because even if there is no reservation contract, if the parties have acted in good faith during the negotiation and conclusion of this contract, the other party can claim compensation for the trust interest. On the other hand, the calculation of the amount of damages for breach of the advance contract by reference to the performance benefits of this contract may also make it unnecessary to distinguish between the advance contract and the present contract. A more prudent approach would be that, in the case of a breach of the pre-contract, the court should decide between the reliance interest and the performance interest of the contract, based on the maturity of the transaction. The more detailed the content of the reservation contract, the higher the maturity of the transaction, the higher the degree of trust of the parties, and the higher the amount of liquidated damages. In particular, where the reservation contract has reached an agreement on the main contents of the contract, such as the subject, subject matter, quantity, price or remuneration, the people's court shall support the party's request to bear the liability for compensation for the breach of the reservation contract with reference to the performance interests of the contract. In this way, it can not only prevent the dishonest behavior of the parties, but also protect the transaction security of the parties to the greatest extent if the reservation contract cannot be enforced.
【Controversial Views】
The Civil Code incorporates the provisions of Article 2 of the Judicial Interpretation on Sales Contracts (Fa Shi [2012] No. 8) and stipulates in Article 495 that the reservation contract (paragraph 1) and the liability for breach of contract (paragraph 2) shall be borne for breach of contract, thus providing a clearer legal basis for the people's courts to handle cases of reservation contract disputes. However, as to whether the liability for breach of contract that a party should bear for breach of contract includes continued performance, not only Article 2 of the Judicial Interpretation of the Sales Contract (Fa Shi [2012] No. 8) is vague, but also Article 495, Paragraph 2 of the Civil Code avoids this issue, and only provides in general terms that "if one of the parties fails to perform the obligation to conclude the contract as stipulated in the reservation contract, the other party may request it to bear the liability for breach of the reservation contract". Judging from the specific circumstances of judicial practice, there are those who believe that continued performance should not be adopted as a remedy for breach of the reservation contract, and there are also those who believe that continued performance can be adopted as a remedy for the breach of the reservation contract. In fact, in the process of formulating the Judicial Interpretation on Sales Contracts, there are also two different viewpoints: the main reason for the affirmative theory is that the reservation contract is a specific situation of the contract, and the breach of the reservation contract should bear the same liability for breach of contract including continued performance, just like the breach of other contracts, and as for the lack of content of the reservation contract, it can be solved through the contract interpretation and the rules for filling the loopholes in the contract. In addition, many countries or regions in the civil law system also recognize that when the parties refuse to sign this contract according to the court's judgment of continued performance, the court judgment can be used to replace the parties' expression of intent to enter into this contract, and then the application for signing this contract and the performance of this contract will be heard together. The main reason for the negative argument is that the signing of this contract is a situation where "the subject matter of the debt is not suitable for compulsory performance" as stipulated in Article 110 of the Contract Law, and whether it is a compulsory signing of this contract or an expression of intent to conclude this contract by a court judgment instead of a party is incompatible with the principle of autonomy of will and violates the spirit of modern civilization.
The above-mentioned controversy also occurred during the compilation of the Civil Code. In line with this, there are also different views on the legal effect of the reservation contract: scholars who hold the theory of the necessity of contracting believe that if the breach of the reservation contract cannot be remedied, the normative function of the law on the reservation contract cannot be realized, because the compensation for the loss of the breach of the reservation contract is difficult to calculate, and the party who violates the reservation contract may only bear the compensation for the trust interest in the end, and even if there is no reservation contract, the dishonest party must also bear the liability for the negligence of the other party for the loss of the trust interest. Therefore, only by forcing the parties to perform the obligation to conclude this contract can the normative function of the reservation contract be realized; Scholars who hold the theory that there should be consultation believe that the reservation contract usually does not contain all the contents of the contract, and if the people's court can rule that the parties should conclude the contract based on the reservation contract or replace the contract with the judgment of the people's court when the parties do not conclude the contract in accordance with the judgment, then it will become meaningless to distinguish between the reservation contract and the contract.
Since the theory that the contract should be negotiated and the theory that the contract must be concluded have their own reasons and cannot be persuaded by each other, a compromise view emerges, which holds that the degree of specificity of the content of the advance contract should be distinguished to determine whether the remedy of continued performance can be adopted: if the advance contract already has all the substantive content of the contract, the parties should be given the right to request continued performance of the contract to prevent the parties from escaping their debts by refusing to enter into the contract in violation of the principle of good faith; If the pre-contract only contains part of the contents of the contract, and the other contents still need to be determined by the parties through negotiation, the parties should not be given the right to request continued performance of the pre-contract contract, and the non-breaching party can only request the breaching party to bear the liability for damages for violating the pre-contract contract, otherwise, the principle of autonomy of will will be overlooked.
On the surface, it is reasonable to say that the compromise theory should be negotiated and the contract must be concluded, but a careful analysis will also reveal a problem: although the contract entered into by the parties stipulates that the contract will be concluded in the future, if the reservation contract already has all the substantive content of the contract, it means that there is no opportunity for further negotiation between the parties after the conclusion of the reservation contract, is it still necessary to distinguish between the reservation contract and the present contract? In other words, should we strictly limit the reservation contract to the occasions where the parties still retain the right to make decisions on whether to conclude the contract after the conclusion of the reservation contract, or should we distinguish the level of detail in the content of the reservation contract and then classify the violation of the reservation contract, and judge whether the remedy of continued performance can be adopted accordingly?
[Understanding and Application]
If one party fails to perform its obligation to conclude this contract after the reservation contract takes effect, or fails to conclude this contract due to its failure to conclude this contract due to its breach of the principle of good faith when negotiating and concluding this contract, does the other party have the right to request the people's court to make a judgment to continue to perform? In our opinion, it is not appropriate to remedy the breach of the advance contract by continuing to perform under the circumstance that the parties retain the final decision-making power on whether to finalize the transaction. There are several reasons for this.
First, the reason why the parties first entered into the advance contract instead of directly entering into the contract is that the two parties have not been able to reach an agreement on all the substantive contents of common concern, but they want to fix the agreed content and give it legal binding force. In the case of compulsory contracting, although the content that has not been agreed upon by the parties can be obtained by the adjudicator by applying the rules of contract interpretation and the rules of filling the loopholes in the contract, this is precisely what the parties hope to avoid by entering into the contract without directly entering into the contract. In other words, the purpose of the parties to conclude the advance contract is to retain their decision-making power over the conclusion of the contract, which includes the right to decide on the content of the contract, so as to prevent the adjudicator from directly confirming the content of the contract in accordance with the rules of contract interpretation and the rules of filling in the loopholes in the contract. In the case where the parties have not reached an agreement on all the substantive contents of the contract and enter into this contract, it is inconsistent with the principle of private law autonomy to directly decide the content of this contract by the adjudicator.
Second, if remedies for continued performance of a breach of an advance contract are allowed, it may result in the loss of the normative function of the advance contract. In countries or regions that recognize that remedies for breach of contract for breach of contract can be obtained through continued performance, most of them believe that when a party fails to perform its obligation to conclude this contract, the court may order the party to perform its obligation to enter into this contract, and in the event of its failure to perform its obligation to conclude this contract, substitute a judgment for the intention of the party, and then require the party to perform the obligations set forth in this contract in accordance with the judgment of the court, and for the sake of litigation economy, In the same lawsuit, the parties are allowed to file a claim for the performance of the contract and the claim for the performance of the contract according to the judgment together for trial and trial. [6] Obviously, the result of this treatment is that there is no substantial difference in the outcome between the parties entering into an advance contract and a contract of this contract. In this case, what is the point of recognizing the contract of appointment and distinguishing it from this contract?
Third, there is no provision in the current law of the mainland to replace the will of the parties with a court judgment, and there is no need to recognize the substitution of a court judgment for the intention of the parties in the future civil enforcement legislation. In countries or regions that recognize that the breach of an advance contract can be remedied by continued performance, most of their enforcement laws clearly stipulate that under certain circumstances, the judgment of the court may substitute the intention of the parties to conclude the contract. In the author's view, this practice of substituting the intention of the parties by court judgment may be mainly rooted in the recognition of the theory of property rights in these countries or regions. According to the theory of property rights, the sales contract and mortgage contract entered into by the parties only create a creditor's rights and debts relationship between the parties, and cannot directly cause a change in the real right, and the change of the real right must be separately agreed by the parties and the statutory publicity method should be practiced. The question is, if it is not possible to reach an agreement on the act of property right after the conclusion of the creditor's right contract, can the parties request compulsory performance of the creditor's right contract, so that the parties can reach an agreement on the change of the property right? Since most countries or regions that recognize the theory of acts in rem adhere to the principle of actual performance, almost all of their enforcement laws stipulate that when the parties cannot reach an agreement, the court may make a judgment instead of the parties' intentions, so as to avoid the impact on the principle of actual performance due to the recognition of the theory of acts in rem. The civil law of the People's Republic of China does not recognize the theory of acts in rem, and holds that the agreements signed by the parties such as sales contracts and mortgage contracts already contain the parties' agreement to cause changes in the property rights, and there is no need for the parties to enter into a separate property contract in addition to the above-mentioned agreements, and naturally there is no need for the future Civil Enforcement Law to replace the parties' intentions with a court judgment when the parties cannot reach an agreement. In addition, it should be pointed out that, even in countries or regions that recognize the theory of acts in rem, although it is necessary to replace the intention of the parties with a court judgment, the relationship between the creditor's right act and the act in rem is not the same as the relationship between the reservation contract and the contract.
As mentioned above, many people are worried that if the breach of the reservation contract is not allowed to be remedied by continuing to perform, the normative function of the reservation contract cannot be realized, because the purpose of the parties to enter into the reservation contract is to agree that the contract will be concluded in the future, and when one party fails to perform the obligation to conclude the contract, only by forcing it to perform the obligation to conclude the contract can the normative function of the reservation contract be realized, and then the dishonest behavior of the parties can be sanctioned. In our view, although this concern is not unreasonable, the real reasons for such concerns are, first, that judicial practice in the past misunderstood a large number of situations that belonged to this contract or had been transformed into a contract to mean that there was only an advance contract relationship between the parties, and second, in past judicial practice, the amount of compensation for losses caused by breach of reservation was defined as the trust interest at the time of entering into this contract, resulting in the failure to effectively guarantee the security of transactions between the parties. In fact, if the circumstances in which the parties no longer retain the opportunity to negotiate for themselves are excluded from the scope of the pre-contract contract, there should be no fear that the loss of the remedy for continued performance will affect the normative function of the pre-contract contract. In this regard, a strict distinction should be made between a pre-contractual contract and a contract with conditions for its entry into force, because in the latter case, the contract would come into force once the conditions had been fulfilled, and there would be no question of the parties still having the final say in the conclusion of the contract. It was suggested that the actual performance of the advance contract should be determined on the basis of whether the pending matters of the advance contract were subjectively or objectively unresolved. Obviously, if it is an objectively pending matter, it should fall within the conditions attached to this contract, and only a subjectively pending matter will involve a separate conclusion of this contract. In addition, it was suggested that a distinction should be made between whether the advance contract contained the main terms of the future contract and that the doctrine of mandatory consultation and mandatory contracting should be applied on this basis, respectively; It was also suggested that a distinction should be made between simple appointment contracts, standard appointment contracts and complete appointment contracts, and that only complete appointments could be subject to compulsory performance. In the author's opinion, the fact that the reservation contract contains the main terms of the future contract does not mean that the parties have not left themselves the final decision-making space, and in practice, there is no question of the so-called complete reservation contract, because since it is an appointment contract, it means that the parties still have matters that need to be further negotiated and have not yet reached an agreement. In our view, in the context of strictly restricting the reservation contract to the parties' reserve of decision-making power on whether to finalize the transaction, the normative function of the reservation contract can be fully realized through the compensation for losses in violation of the reservation contract. Although this judicial interpretation does not expressly stipulate that if one of the parties violates the reservation contract, the other party may not request continued performance, it is not difficult to conclude that the people's court should not support the request of the parties to compensate for the losses caused by the breach of the reservation contract by the other party in accordance with the law from the provisions of paragraph 1 of this article that "if one of the parties fails to perform the obligation to conclude the reservation contract after the reservation contract takes effect, and the other party requests compensation for the losses caused thereby, the people's court shall not support it.
The question is, what is the scope of damages for breach of the reservation contract? Obviously, the scope of compensation for breach of the reservation contract should be the performance interest of the reservation contract. However, since the subject matter of the advance contract is the future conclusion of the contract, it is undoubtedly difficult to calculate the performance benefit of the breach of the contract in the event that the contract is not concluded. In past judicial practice, considering that the breach of the reservation contract is different from the contract, many people have defined the compensation for the loss of the breach of the reservation contract as the trust interest in the process of entering into the contract, so as to distinguish it from the performance interest of the contract. Although there is some truth in this approach, there is also the problem of overhead reservation contracts, because even if there is no reservation contract, according to Article 500 of the Civil Code, if the parties have dishonest behavior in the process of entering into this contract and cause losses to the other party, they must also be liable for compensation for the trust interests of the other party. It can be seen that defining the scope of compensation for breach of the reservation contract as the trust interest of entering into the contract is not enough to achieve the normative purpose of the reservation contract, which is why some people are worried that the security of the transaction of the parties cannot be fully guaranteed through compensation for losses alone. For this reason, it has been argued that, in order to ensure the security of the parties' transactions, the scope of compensation for breach of the reservation contract should be defined according to the performance interest of this contract.
Obviously, if liability for breach of the advance contract were to be defined on the basis of the performance interest of the contract, it would also result in the reservation contract being set aside, since there would be no difference in the scope of compensation between the breach of the contract and the breach of the contract. In our view, on the one hand, the scope of compensation for breach of the advance contract cannot be defined on the basis of the performance interest of the contract, but on the other hand, the scope of compensation for breach of the advance contract cannot be limited to the reliance interest in entering into the contract, but should be determined by the judge at the discretion of the judge between the reliance interest in entering into the contract and the performance interest of the contract according to the maturity of the transaction embodied in the advance contract. In other words, the higher the maturity of the transaction embodied in the advance contract, the closer it is to the contract, and the closer the scope of compensation is to the performance interest of the contract. Conversely, the lower the maturity of the transaction embodied in the advance contract, the farther away from the conclusion of the contract, the closer the scope of compensation will be to the trust interest of the contract.
The question is, how to determine the maturity of the transaction reflected in the reservation contract? We believe that the reservation contract is the product of the transaction stage, so there are two indicators to judge the maturity of the transaction reflected in the reservation contract: first, the completeness of the content of the reservation contract; The second is the degree to which the conditions for the conclusion of this contract have been fulfilled. The so-called completeness of the content of the reservation contract refers to whether the reservation contract has stipulated the content of the contract to be concluded in the future, and whether the agreement is comprehensive and detailed. If the pre-contract not only stipulates the subject and subject matter of the contract to be concluded in the future (which is a necessary condition for the establishment of the pre-contract contract), but also stipulates the quantity and price of the subject matter involved in the contract, and even clearly stipulates the performance period, the method of performance, the place of performance and the method of dispute resolution, etc., it means that the transaction maturity reflected in the pre-contract is relatively high; On the contrary, if the pre-contract only stipulates the subject and subject matter of the contract, and does not involve the quantity and price of the subject matter involved in the contract, it means that the transaction maturity reflected in the pre-contract is low. From the perspective of practice, some advance contracts have already reached an agreement on the main content of the contract to be concluded in the future, and although it is agreed that the contract will be concluded in the future, the negotiation space between the parties is already very small, or even only waiting for the final signature. In this case, the scope of compensation for breach of the reservation contract should be defined by reference to the performance interest of this contract. However, if the pre-contract is very simple, only the subject and subject matter of the contract are stipulated, and everything else needs to be negotiated when the contract is signed, it means that the transaction between the parties is still in the initial stage, and the protection of the parties can only stay at this stage. This is the first factor to consider.
The second factor to be considered is whether the conditions for the conclusion of the contract have been fulfilled. This is because, in some cases, the parties choose to enter into the pre-contract first and then enter into the contract because the conditions for entering into the contract directly have not yet been fulfilled, for example, the developer has not yet obtained a pre-sale permit. Considering that there is a certain degree of uncertainty as to whether the developer will be able to obtain a pre-sale license, even if the contents of the pre-sale contract are very comprehensive, if the developer has not been able to obtain a pre-sale license, the scope of compensation for breach of the pre-sale contract cannot be defined by referring to the performance interest of this contract, but should consider the possibility of the developer obtaining a pre-sale license in the future, and make a discretionary determination between the trust interest in entering into this contract and the performance interest of this contract.
In short, according to the maturity of the transaction embodied in the advance contract, the people's court should determine the loss of breach of the advance contract at its discretion between the trust interest of entering into the contract and the profit available from the performance of the contract, which can not only ensure the security of the transaction between the parties, but also realize the normative function of the advance contract. In other words, compensation for damages for breach of contract is sufficient to achieve relief for breach of the reservation contract. In this regard, paragraph 2 of this Article, on the basis of respecting the autonomy of the parties, clearly stipulates that the people's court shall comprehensively consider factors such as the completeness of the content of the reservation contract and the degree of fulfillment of the conditions for entering into this contract. In fact, this kind of treatment has been around for a long time in practice. For example, in the case of Zhong Mouqing v. Shanghai Jinxuan Dadi Real Estate Project Development Co., Ltd., the first-instance judgment held that Jinxuan Dadi Company had violated its obligations under the reservation contract and should compensate the appellant Zhong Mouqing for the corresponding losses, but only determined the amount of compensation of 10,000 yuan. In this regard, the second-instance judgment pointed out that the amount of compensation determined by the first-instance judgment was difficult to compensate the actual losses of the non-breaching party, and in order to promote the civil entity to perform its civil obligations in good faith, maintain the safety and order of the transaction, and fully protect the civil rights and interests of the non-breaching party, on the basis of comprehensively considering the development trend of the real estate market in Shanghai in recent years and the actual situation of both parties, Jinxuan Dadi Company was determined to compensate Zhong Mouqing 150,000 yuan. As for Zhong Mouqing's request for Jinxuan Mansion Company to compensate for its economic losses at a price of 15,000 yuan to 20,500 yuan per square meter of floor area of the shop, the second-instance judgment held that: because the evidence submitted by him could not fully prove the exact circumstances of the shops referred to in the letter of intent involved in the case, and according to the multiple pre-sale contracts under which Jinxuan Mansion Company sold the shops to outsiders, the prices of the shops varied from time to time and from person to person, and although Zhong Mouqing paid the intent money according to the contract, However, after all, there is a difference in legal nature between the reservation contract signed by the two parties and the formal sales contract, so the amount of compensation claimed by Zhong Mouqing cannot be fully supported. It can be seen that in this case, the parties claimed that the amount of damages for breach of the reservation contract should be determined based on the performance interest of the contract, and the first-instance judgment seemed to determine the amount of damages for the breach of the reservation contract according to the trust interest in entering into the contract, but the second-instance judgment did not calculate it according to the trust interest at the time of entering into the contract, nor on the basis of the benefits available from the performance of the contract, but on the maturity of the transaction reflected in the reservation contract (such as the exact situation of the shop referred to in the letter of intent, the price of the shop, etc.). The amount of damages for breach of the reservation contract is determined between the interest of reliance and the benefit of performance.
[Practical issues]
Although this article does not clearly stipulate whether the other party has the right to request continued performance when one of the parties fails to perform its obligations under the advance contract, paragraph 1 of this article only stipulates that "if the other party requests compensation for the losses caused thereby, the people's court shall support it in accordance with law", it should be considered that the request for continued performance submitted by the party cannot be supported. In this regard, after the conclusion of the reservation contract, the decision-making power enjoyed by the parties on whether to finalize the transaction is reflected in two aspects: first, the content that has not been agreed upon by the parties cannot be directly obtained by the adjudicator according to the rules of contract interpretation and contract loophole filling, but should be confirmed by the parties through the conclusion of this contract; Second, if one party fails to perform the reservation contract, the other party cannot request the people's court to compel the performance of the reservation contract, but can only request it to bear the liability for damages.