Common law perspectives on performance and breach

INTRODUCTION This chapter, which complements Chapter 12‘s coverage on performance and breach, examines three important issues in Chinese contract law relating to performance and breach. It examines the three issues using the corresponding law in England and Wales as a comparative tool. The three issues considered are: (1) contracts in favour of third parties; (2) anticipatory breach and the defence of insecurity; and (3) the doctrine of change of circumstances. We will not consider good faith in the performance of contracts separately, although we will consider how it punctuates these issues. CONTRACTS IN FAVOUR OF THIRD PARTIES Relevant Law Article 64 of the Contract Law of the People’s Republic of China (CCL) makes the debtor liable to the creditor for his failure to perform an obligation under the agreement to a third party or for not performing it in conformity with the agreement. Unlike Article 269(1) of the Taiwan Civil Code, this does not create an exception to the privity rule by giving the third party the right to sue on the contract. The creditor is still the party who needs to bring the action. The discussion that follows on how the common law deals with claims by the creditor to enforce obligations owed to third parties will be of particular relevance. However, the ‘will theory’ of contract law is present to the extent that the parties to an agreement can also choose to bestow rights, but seemingly not obligations, on third parties. Under Article 84 of the Chinese General Principles of Civil Law (GPCL), parties can confer rights on third parties, but the third party must have agreed to be the beneficiary. Such an offer can be revoked or modified before the third party has accepted the offer or made preparations for the contract on the basis of an offer it believes is irrevocable. The creation of third-party rights under the CCL has similarities in situations, discussed later in this chapter, where the common law finds a collateral contract with a third party on the basis of an earlier contract in the context of the overall circumstances. Also the conditions for the offer being non-revocable bear comparison with similar rules in England and Wales under the Contract (Rights of Third Parties) Act 1999, which allows third parties, in certain circumstances, to enforce terms made for their benefit.