1. Nonperformance of Contractual duty Imperfect Performance Contractual Liability and Torts

2. Imperfect Performance Definition of Imperfect Performance Legal Basis of Imperfect Performance Nature of Imperfect Performance Classification of Imperfect Performance Liability arising from Imperfect Performance

3. Definition of Imperfect Performance The performance tender by the defaulting party is not in conformity with the tenor of the prestation (the content of performance agreed, or the term of the contract). –The defaulting party performed. –Performance is not in conformity with the tenor of the prestation. Tender a defective goods Caused damage to the interest inherent to the aggrieved party.

4. Foundation of Imperfect Performance The defaulting party breached the ancillary duty or incidental duty –Three layers of contractual duty Principal duty –Promised by the party –Purpose of the contract Secondary duty –Promised by the party –Secondary duty Ancillary duty –Based on the good faith –The duty to protect the other party –The duty to assist the other party

5. Nature of Imperfect Performance Non-performance –Breach contractual duty Delict –Breach duty of care

6. Classification of Imperfect Performance Defective Performance –Tender unqualified goods Detrimental Performance –Tender unqualified goods and caused further damage to the aggrieved party

7. Liability arising from Imperfect Performance under ROC Civil Code Elements –The defaulting party performed. –Performance is not in conformity with the tenor of the prestation. Tender a defective goods Caused damage to the interest inherent to the aggrieved party. –The nonconformity is imputable to the defaulting party

8. Liability arising from Imperfect Performance under ROC Civil Code Impossible to cure ( applied the rule of liability of Impossibility) (ROC CC 227I) –Claimed damages due to impossibility of perfect performance (ROC CC 226) Defective performance: Recovery of property loss –Claimed damages for injury incurred by detrimental performance (ROC CC 227II) Recovery of property loss If the injury to personality right occurred, the aggrieved party may claim emotional damage. (ROC CC 227-I) –Rescinded the contract Discharge the aggrieved party’s duty. (ROC CC 256); claimed the profit back awarded from the aggrieved party (ROC CC 259)

9. Liability arising from Imperfect Performance under ROC Civil Code Possible to cure (applied the rule regulating delay of performance) (ROC CC 227I) –Claim the cure of performance Claim to cure –Enforced through specific performance Claim damage incurred by its delay of performance If delay to cure –Notice to cure within a reasonable period of time (ROC CC 254, 255) –Lapse of time, rescinded the contract Discharge the aggrieved party’s duty. (ROC CC 254, 255) Discharge the aggrieved party’s duty. (ROC CC 254, 255) Claimed the profit back awarded from the aggrieved party (ROC CC 259) –Claimed damages for injury incurred by detrimental performance (ROC CC 227II) Recovery of property loss If the injury to personality right occurred, the aggrieved party may claim emotional damage. (ROC CC 227-I)

10. ROC Civil Code 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. Article 227-1 –If the creditor’s personality has been injured by reason of the debtor’s non-performance, the debtor shall be bound to compensate for the injury in compliance mutatis mutandis with the provisions of Article 192 to Article 195 and Article 197.

11. ROC Civil Code Article 192 –A person who has wrongfully caused the death of another shall also be bound to make compensation for the injury to any person incurring the medical expenses, increasing the need in living, or incurring the funeral expenses. –If the deceased was statutorily bound to furnish maintenance to a third party, the tortfeasor shall also make compensation to such third party for any injury arising therefrom. The provision of the second paragraph of Article 193 shall apply to the compensation of the preceding paragraph. Article 193 –If a person has wrongfully damaged to the body or health of another, and caused the injured person to lose or decrease his laboring capacity, or to increase the need in living, the tortfeasors shall be bound to make compensation to the injured person for any injury arising therefrom. –The court may, on the application of the parties, order the compensation of the preceding paragraph to be made in periodical payments of money, but the court shall compel the tortfeasor to furnish security. Article 194 –In case of death caused by a wrongful act, the father, mother, sons, daughters and spouse of the deceased may claim for a reasonable compensation in money even if such injury is not a purely pecuniary loss.

12. ROC Civil Code Article 195 –If a person has wrongfully damaged to the body, health, reputation, liberty, credit, privacy or chastity of another, or to another’s personality in a severe way, the injured person may claim a reasonable compensation in money even if such injury is not a purely pecuniary loss. If it was reputation that has been damaged, the injured person may also claim the taking of proper measures for the rehabilitation of his reputation. –The claim of the preceding paragraph shall not be transferred or inherited, except a claim for compensation in money has been promised by contract or has been commenced. –The provisions of the preceding two paragraphs shall be mutatis mutandis applied when a person has wrongfully damaged to another’s status based on the relationship to their father, mother, sons, daughters, or spouse in a severe way.

13. Nonconforming Performance in Quality under PRC Contract Law Elements of Nonconforming Performance in Quality –Duty to perform in accordance with the quality prescribed in contract. PRC CL §107, §111 –Performance does not meet the prescribed quality requirements Defective performance

14. Nonconforming Performance in Quality under PRC Contract Law Liability –Cure of non-conforming performance (PRC CL §107, GPCL §111) Decided by original contract –The breaching party shall be liable for breach in accordance with the contract. (PRC CL §111) Decided by subsequent agreement or trade usage –Where the liabilities for breach were not prescribed or clearly prescribed, liability shall be decided in accordance with Article 61. (PRC CL §111)

15. Nonconforming Performance in Quality under PRC Contract Law Decided by the aggrieve party’s selection –If liability 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, returning the goods, or reduction in price or remuneration, etc. –If repair, replacement, or remaking is impossible, improper or impractical to enforce, the cure of performance shall not be enforced. (analogues to PRC CL §110 )

16. Nonconforming Performance in Quality under PRC Contract Law –Claimed damage (PRC CL §107, GPCL §111 ) After the cure of non-conforming performance, if the other party has sustained other loss, the breaching party shall pay damages. (PRC CL §112) the amount of damages payable shall be equivalent to the other party's loss resulting from the breach –including any benefit that may be accrued from performance of the contract, provided that the amount shall not exceed the likely loss resulting from the breach which was foreseen or should have been foreseen by the breaching party at the time of conclusion of the contract. (PRC CL §113)

17. PRC GPCL Article 111 – If a party fails to fulfill its contractual obligations or violates the terms of a contract while fulfilling the obligations, the other party shall have the right to demand fulfillment or the taking of remedial measures and claim compensation for its losses.

18. PRC GPCL Article 116 –If a party fails to fulfill its contractual obligations on account of a higher authority, it shall first compensate for the losses of the other party or take other remedial measures as contractually agreed and then the higher authority shall be responsible for settling the losses it sustained.

19. PRC Contract Law Article 107 –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.

20. PRC CL Article 111 Liabilities in Case of Quality Non- compliance –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.

21. PRC CL Article 61 Indeterminate Terms; Supplementary Agreement –If a term such as quality, price or remuneration, or place of performance etc. was not prescribed or clearly prescribed, after the contract has taken effect, the parties may supplement it through agreement; if the parties fail to reach a supplementary agreement, such term shall be determined in accordance with the relevant provisions of the contract or in accordance with the relevant usage.

22. PRC CL 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.

23. PRC CL 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.

24. 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 non-conforming performance, the other party has sustained other loss, the breaching party shall pay damages.

25. PRC CL Article 113 Calculation of Damages; Damages to Consumer –Where a party failed to perform or rendered non-conforming performance, thereby causing loss to the other party, the amount of damages payable shall be equivalent to the other party's loss resulting from the breach, including any benefit that may be accrued from performance of the contract, provided that the amount shall not exceed the likely loss resulting from the breach which was foreseen or should have been foreseen by the breaching party at the time of conclusion of the contract. –Where a merchant engages in any fraudulent activity while supplying goods or services to a consumer, it is liable for damages in accordance with the Law of the People's Republic of China on Protection of Consumer Rights.

26. Contractual Liability and Torts Classification of and Element of delictious liability –Intentional or negligent Infringement of right A person who, intentionally or negligently, has wrongfully damaged the rights of another is bound to compensate him for any injury arising therefrom. –Intentional Infringement of interest The same rule shall be applied when the injury is done intentionally in a manner against the rules of morals. –Violation of law A person, who violates a statutory provision enacted for the protection of others and therefore prejudice to others, is bound to compensate for the injury, except no negligence in his act can be proved.

27. Contractual Liability and Torts Rights –Non-property Right Right of personality Moral right (copyright law) Rights arising from family status –Property right The right in rem –Mortgagee’s right The right arising from obligation (obligation-right) Intellectual rights

28. The defaulting party breaching contract –Infringement of contractual right The third party detriment the contractual right

29. Case Study X entered into a contract to hire Y as a live band singer to perform in X’s theater for a month. Gangster Z operated another theater just in front of X’s theater and threaten Y to sing at his theater instead at X’ theater. Y didn’t compliance Z’s threat and rejected his request. Z shoot Y to death. Can X claim damages from Z?