Nonperformance of Contractual Duty
(Breach of Contract)
Meaning and Requisites of Nonperformance
Type of Nonperformance
Effect of Nonperformance
Impossibility
Meaning and Requisites of
Nonperformance

Existence of a Contractual Duty
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There is a valid contract or an obligation.
Existence of Imputability
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Intent
Negligence
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Gross negligence; Slight negligence
Occurrence of Hurdle to Perform the obligation
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Prestation has been tendered on the due day
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Imperfect performance
Nothing has been tendered on the due day
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Impossibility of performance
Delay in performance
Anticipatory Repudiation
Imputability
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Intent
Negligence
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Gross negligence;
Slight negligence
Burden of Proof to the Defaulting Party’s Fault

The delict provided in article 184 first paragraph of Civil Code
requires “intentional or negligently” wrongful act damaged the rights
of another as a requisite element. Thus, the claimant who claims
damage from the other person who is liable for wrongful act shall
bear the burden of proof for intent of negligent element. In nonperformance case, the reason for assuming liability for damage by
the obligor is the existence of imputable fact to the obligor.
Therefore, even though the obligee can prove the existence of
contractual relationship and suffering damages therefrom, then he is
entitled to claim the debtor to assume the liability for nonperformance. If the obligor defense that the non-performance was
caused by the reason that can not be imputable to the obligor, the
burden of proof shall be on the obligor’s side. (Taiwan Supreme
Court Civil Judgment Tai Shang No. 267 (1993)).
PRC CL
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
Article 107
Types of Liabilities for Breach
If a party fails to perform its obligations under a contract,
or rendered non-conforming performance, it shall bear
the liabilities for breach of contract by specific
performance, cure of non-conforming performance or
payment of damages, etc.
Article 108
Anticipatory Breach
Where one party expressly states or indicates by its
conduct that it will not perform its obligations under a
contract, the other party may hold it liable for breach of
contract before the time of performance.
PRC CL
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
Article 109
Monetary Specific Performance
If a party fails to pay the price or remuneration, the other party may
require payment thereof.
Article 110
Non-monetary Specific Performance; Exceptions
Where a party fails to perform, or rendered non-conforming
performance of, a non-monetary obligation, the other party may
require performance, except where:
(i)
performance is impossible in law or in fact;
(ii) the subject matter of the obligation does not lend itself to
enforcement by specific performance or the cost of performance is
excessive;
(iii) the obligee does not require performance within a reasonable
time.
PRC CL

Article 111
Liabilities in Case of Quality Noncompliance
Where a performance does not meet the prescribed
quality requirements, the breaching party shall be liable
for breach in accordance with the contract. Where the
liabilities for breach were not prescribed or clearly
prescribed, and cannot be determined in accordance
with Article 61 hereof, the aggrieved party may, by
reasonable election in light of the nature of the subject
matter and the degree of loss, require the other party to
assume liabilities for breach by way of repair,
replacement, remaking, acceptance of returned goods,
or reduction in price or remuneration, etc.
PRC CL

Article 112
Liability for Damages
Notwithstanding Subsequent Performance or
Cure of Non-conforming Performance
Where a party failed to perform or rendered
non-conforming performance, if notwithstanding
its subsequent performance or cure of nonconforming performance, the other party has
sustained other loss, the breaching party shall
pay damages.
PRC CL
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
Article 117
Force Majeure
A party who was unable to perform a contract due to force majeure
is exempted from liability in part or in whole in light of the impact of
the event of force majeure, except otherwise provided by law.
Where an event of force majeure occurred after the party's delay in
performance, it is not exempted from liability.
For purposes of this Law, force majeure means any objective
circumstance which is unforeseeable, unavoidable and
insurmountable.
Article 118
Duty to Notify in Case of Force Majeure
If a party is unable to perform a contract due to force majeure, it
shall timely notify the other party so as to mitigate the loss that may
be caused to the
Type of Nonperformance
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Imperfect performance
Impossibility of performance
Delay in performance
Anticipatory Repudiation
Effect of Nonperformance

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Specific performance
Damage


Recovery
Pecuniary damages
Liquidated damage
 Forfeiture deposit (earnest money)

Impossibility
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Classification of Impossibility
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Initial Impossibility (at the time of the conclusion of
the contract), Subsequent Impossibility
Objective Impossibility, Subjective Impossibility
Impossibility in Fact, Impossibility in Law
Permanent Impossibility, temporary Impossibility
Total Impossibility, Partial Impossibility
Case Study 1

X entered into a contract to sell a painting to Y
on Feb 10, 2006 and promised to deliver the
painting on Feb 14, 2006.
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If the painting was burned up on Feb 8, what
relationship between X and Y?
If the painting was stolen by Z on Feb 8, what
relationship between X and Y?
If the painting was burned up on Feb 13, what
relationship between X and Y?
If the painting was stolen by Z on Feb 13, what
relationship between X and Y?
Initial Objective Impossibility


If the prestation of a contract is impossible, it is void.
However, if the impossibility can be removed and if the
parties, at the time when the contract was constituted,
intended to have it performed after the removal of the
impossibility, the contract is still valid. (RCC 246)
When a contract is void on account of the impossibility
of the performance, the party who at the time of
constituting the contract knew or might know the
impossibility is responsible for the damage caused to the
other party who, without his own negligence, believed in
the validity of the contract. the several prestations
subject to a choice is impossible. (RCC 247I)
ROC Civil Code
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Article 246
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
If the prestation of a contract is impossible, it is void. However, if the impossibility can be
removed and if the parties, at the time when the contract was constituted, intended to have
it performed after the removal of the impossibility, the contract is still valid.
If the contract is subject to a suspenseful condition or to a time of commencement, and if
the impossibility has been removed prior to the fulfillment of the condition or the arrival of
the time, the contract is valid.
Article 247

When a contract is void on account of the impossibility of the performance, the party who at
the time of constituting the contract knew or might know the impossibility is responsible for
the injury caused to the other party who, without his own negligence, believed in the validity
of the contract.
The provision of the preceding paragraph shall be mutatis mutandis applied if the prestation
is partially impossible and the contract is valid in respect to the possible part, or if one of the
several prestations subject to a choice is impossible.
The claims for the injury in the preceding two paragraphs shall be extinguished by
prescription if not exercised within two years.
Japan Civil Code

The obligor is conclusively discharged
from his duty and although the Japan Civil
Code does not so provide, impossibility
operates as grounds for extinction of an
obligation.
PRC Contract Law


PRC CL contains no rule on contracts involving initial impossibility.
Following the rule of UNIDROIT art. 3.3(1)


Article 3.3 (Initial impossibility)
(1) The mere fact that at the time of the conclusion of the
contract the performance of the obligation assumed was
impossible does not affect the validity of the contract.
(2) The mere fact that at the time of the conclusion of the
contract a party was not entitled to dispose of the assets to
which the contract relates does not affect the validity of the
contract.
A contracts involving initial impossibility will be valid and the party
whose performance is impossible will be liable for non-performance.
Initial Subjective Impossibility
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

The rule in Article 246 followed the
German Civil Code Article 306. the
“Unmoglichkeit” means “objective
impossibility.”
Subjective impossibility is a gap of law.
Analogue to subsequent impossibility.
Case Study 2

A lent his laptop to B, B sold to C without
A’s assent. C did not know B has no right
to sell this laptop. Upon A found his laptop
in C’s office, A claimed it back. What result
will be?
A may claim damages based on torts liability (§184) or liability
due to breaching contractual duty(§470, 231); or rescind
contract, then claim restitution (§254,259,179)
Loan for use: valid,
§464,470)
A
B
Delivery
Sale of goods: valid,
§345,348,367)
Delivery
Contract for transference of
ownership (alienation) (118,
indefinitely valid)
If C not in good
faith: A may claim it
back under §767.
C
If C in good faith: C gains its
ownership under §948, 801
Subsequent Impossibility
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Including objective and subjective Impossibility
An issue regarding breach of contract
Effects can be classified as follows:

The impossibility can not be imputable to either of the parties
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The impossibility can be imputable to the obligor
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If the performance becomes impossible by reason of a circumstance to which the
debtor is imputed, the creditor may claim compensation for any injury arising therefrom.
(RCC 226)
In cases provided by Article 226, the creditor may rescind the contract. (RCC 256)
The impossibility can be imputable to the obligee

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The debtor will be released from his obligation to perform (RCC 225)
The other party shall be released from his obligation to perform the counter-prestation.
If the impossibility is only partial, the counter-prestation shall be reduced
proportionately. (RCC 266)
The debtor will be released from his obligation to perform (RCC 225)
If one of the parties is imputed to the impossibility of the other party’s performance,
the later may claim for the counter-prestation, but the interests saved or ought to be
saved arising from the release of the performance shall be deducted from the counterprestation claimed. (RCC 267)
The impossibility can be imputable to the both parties.

Applied the rule in impossibility imputable to the obligor then measure the extent of
fault of obligee to decide the extent of compensation from obligor, although the ROC
Civil Code does not so provide.
ROC Civil Code
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Article 225
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Article 226
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The debtor will be released from his obligation to perform if the performance becomes impossible by reason
of a circumstance to which he is not imputed.
If the debtor is entitled to claim compensation for the injury against a third party in consequence of the
impossibility of the performance under the preceding paragraph, the creditor may claim against the debtor
for the transfer of the claim for the injury, or for the delivery of the compensation he has received.
If the performance becomes impossible by reason of a circumstance to which the debtor is imputed, the
creditor may claim compensation for any injury arising therefrom.
In the case specified in the preceding paragraph, if one part of the performance becomes impossible and
the remaining part, if performed, will be of no interests to the creditor, the creditor may refuse the
performance of the remaining part and claim compensation for the injury arising from complete nonperformance.
Article 227

If a debtor incompletely performs his obligation by reason of a circumstance to which the debtor is imputed,
the creditor may execute his right according to the provisions of the default or the impossibility of the
performance.
In addition to the injury arising from the incomplete performance in the preceding paragraph, the creditor
may claim compensation for other injuries arising therefrom, if any.
ROC Civil Code

Article 266


If none of the parties is imputed to the impossibility of one party’s
performance, the other party shall be released from his obligation to
perform the counter-prestation. If the impossibility is only partial, the
counter-prestation shall be reduced proportionately.
In the case provided in the preceding paragraph, if the counterprestation has been wholly or partially performed, it may be claimed for
the reimbursement in accordance with the provisions concerning Unjust
Enrichment.
Article 267

If one of the parties is imputed to the impossibility of the other party’s
performance, the later may claim for the counter-prestation, but the
interests saved or ought to be saved arising from the release of the
performance shall be deducted from the counter-prestation claimed.
ROC Civil Code
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Article 373

The profits and dangers of the object sold
pass to the buyer at the time of delivery,
unless otherwise provided by contract.
PRC CL
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

The contract law does not provide for breach due to
impossibility of performance as a special category and so
the general rules on contractual liability apply to this
type of breach.
General justifications for non-performance, such as force
majeure, assumption of risk and contributory conduct,
may also apply to breach due to impossibility of
performance so that the defaulting party’s liability may
be exempted or diminished.
The specific performance shall be denied. (PRCCL
110(1))
PRC CL 110

Article 110 -monetary Specific Performance;
Exceptions

Where a party fails to perform, or rendered nonconforming performance of, a non-monetary
obligation, the other party may require performance,
except where:



(i)
performance is impossible in law or in fact;
(ii) the subject matter of the obligation does not lend itself
to enforcement by specific performance or the cost of
performance is excessive;
(iii) the obligee does not require performance within a
reasonable time.
PRC CL

Article 117



A party who was unable to perform a contract due to force
majeure is exempted from liability in part or in whole in light of
the impact of the event of force majeure, except otherwise
provided by law. Where an event of force majeure occurred after
the party's delay in performance, it is not exempted from liability.
For purposes of this Law, force majeure means any objective
circumstance which is unforeseeable, unavoidable and
insurmountable.
Article 118

Force Majeure
Duty to Notify in Case of Force Majeure
If a party is unable to perform a contract due to force majeure,
it shall timely notify the other party so as to mitigate the loss
that may be caused to the other party, and shall provide proof of
force majeure within a reasonable time.
PRC CL

Article 119
Non-Breaching Party's Duty to Mitigate
Loss in Case of Breach


Where a party breached the contract, the other party shall take
the appropriate measures to prevent further loss; where the
other party sustained further loss due to its failure to take the
appropriate measures, it may not claim damages for such further
loss.
Any reasonable expense incurred by the other party in
preventing further loss shall be borne by the breaching party.
Article 120

Bilateral Breach
In case of bilateral breach, the parties shall assume their
respective liabilities accordingly.
Objective
Impossibility
Subjective
Impossibility
Initial
Impossibility
Subsequent
Impossibility
Contract void
(ROC, JP)
Contract valid
(PRC)
Valid Contract
Valid Contract
Valid Contract
CISG 79


(1) A party is not liable for a failure to perform any of his obligations if he
proves that the failure was due to an impediment beyond his control and
that he could not reasonably be expected to have taken the impediment
into account at the time of the conclusion of the contract or to have
avoided or overcome it or its consequences.
(2) If the party's failure is due to the failure by a third person whom he
has engaged to perform the whole or a part of the contract, that party is
exempt from liability only if:
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
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
(a) he is exempted under the preceding paragraph; and
(b) the person whom he has so engaged would be so exempt if the provisions of
that paragraph were applied to him.
(3) The exemption provided by this article has effect for the period during
which the impediment exists.
(4) The party who fails to perform must give notice to the other party of
the impediment and its effect on his ability to perform. If the notice is not
received by the other party within a reasonable time after the party who
fails to perform knew or ought to have known of the impediment, he is
liable for damages resulting from such non- receipt.
(5) Nothing in this article prevents either party from exercising any right
other than to claim damages under this Convention.
Doctrine of Change of Circumstances

ROC Civil Code Article 227-2


If there is change of circumstances which is not
predictable then after the constitution of the contract,
and if the performance of the original obligation
arising therefrom will become obviously unfair, the
party may apply to the court for increasing or
reducing his payment, or altering the original
obligation.
The provision in the preceding paragraph shall apply
mutatis mutandis to the obligation not arising from
the contract.