[Direct answer]In the Beijing area, the rule of foreseeability refers to the breaching party's liability for compensation being limited to the losses that the party could or should have foreseen at the time of contract conclusion. According to Article 854 of the Civil Code of the People's Republic of China (effective January 1, 2021), the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits that could have been obtained after the performance of the contract, but shall not exceed the losses that the breaching party could or should have foreseen at the time of contract conclusion. To understand this rule, several points need to be grasped: First, the judgment point is at the time of contract conclusion, not at the time of breach; Second, the subject of judgment is the breaching party, based on the information and cognition of the party at that time, and combined with industry common sense and transaction practices to determine the scope of losses that the party should have foreseen; Third, the content of foreseeability is usually losses that have a corresponding causal relationship with the breach of contract and are not too remote in type and approximate amount. In practice, if the losses claimed by the contract-abiding party exceed the foreseeable range, such as abnormal losses arising from special purposes that were not disclosed to the other party, it is usually difficult to obtain support. Therefore, it is helpful to clarify the contractual purpose, scope of losses, and compensation methods at the time of contract conclusion to facilitate future claims; After the breach of contract, the contract-abiding party should organize evidence around the causality and foreseeability of the losses.

1. Problem background and typical scenarios

The rule of foreseeability is an important boundary for determining the scope of compensation for breach of contract, and it is often invoked in practice. There are three typical scenarios: First, the losses claimed by the party in breach of contract far exceed the other party's expectations, and the two parties have disputes over the scope of compensation; Second, due to the special use of the subject matter, additional losses are incurred, and the other party claims that they are unforeseeable; Third, the parties hope to agree on the scope of compensation in advance to avoid disputes. When the Beijing District Court hears contract disputes, it will combine the content of the contract, the transaction background, and industry common sense to determine whether the losses are within the foreseeable scope of the party in breach of contract. Understanding the rule of foreseeability will help parties reasonably determine their rights and obligations when entering into a contract and making claims.

II. Key points of contention

First, the timing of determining foreseeability. Second, who should be used as the standard for judging foreseeability. Third, whether the foreseeable content refers to the type of loss or the specific amount. Fourth, how to determine the foreseeability of special losses. Fifth, the impact of prior agreements on foreseeability. The core is to review the foreseeability rule within the framework of full compensation, clarify that it is limited to the scope of foreseeability of the breaching party at the time of contracting, and judge it in combination with the transaction background and the information disclosed.

III. Professional analysis by Henglue Lawyers

From a practical perspective, the role of the predictability rule is to set reasonable boundaries for breach compensation and avoid the scope of compensation being expanded indefinitely. To understand this rule, we need to grasp four key points. First, the time point. The reference time for judging predictability is the time of contract conclusion, not the time of breach. Generally, new situations arising after contract conclusion do not affect the established scope of predictability. Second, the subject. We should judge whether the breaching party foreseeable or should have foreseen the losses based on its information, cognitive level, and common knowledge and transaction practices in the industry at that time, rather than using the actual losses of the performing party as the reference. Third, the content. Generally, the type and approximate amount of losses should be within the scope of predictability and have a reasonable causal relationship with the breach of contract. Losses that are too indirect or remote are generally not supported. Fourth, exceptions. If the performing party has clearly informed the other party of the special purpose of the subject matter and the possible special losses at the time of contract conclusion, the corresponding losses are usually within the scope of predictability. Conversely, abnormal losses that have not been informed should generally be borne by the performing party itself. Therefore, when concluding a contract, the parties can reduce the risk of disputes by clearly defining the contractual purpose and scope of losses, and stipulating the method of calculating the breach of contract penalty or compensation. After a breach of contract occurs, the party claiming compensation should provide evidence around the causal relationship, the information provided, and industry practices to demonstrate that the losses are within the scope of predictability, thereby seeking reasonable compensation.

IV. Practical suggestions and legal basis

Action suggestions: First, specify the purpose of the contract and the possible scope of losses when drawing up the contract; Second, inform the other party in writing in advance about special purposes or special losses; Third, agree on the method of calculating the breach of contract penalty or compensation to reduce disputes; Fourth, when claiming losses after a breach of contract, explain the causality and foreseeability; Fifth, keep evidence such as the transaction background, communication records, and notification records. For cases involving corporate commercial and contract disputes, you can refer to the relevant provisions of the Civil Code of the People's Republic of China and other laws and regulations.Business and contract disputes in enterprisesFor matters involving clause design and agreements, you may refer to the following for reference:Intellectual property and corporate consultantsLegal basis: Article 584 of the Civil Code of the People's Republic of China (effective from January 1, 2021). The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglue Law Firm's Reminder

Firstly, the compensation shall be limited to the losses that the breaching party could foresee at the time of contract signing. Secondly, the judgment shall be based on the breaching party's common knowledge in his/her industry. Thirdly, special losses are more likely to be compensated if they are notified in advance. Fourthly, pre-agreeing on the scope of compensation can reduce disputes. For contract disputes, you can seek legal assistance through the following channels:Business and contract disputes in enterprisesService acquisition, involving the design of terms that can be combined togetherIntellectual property and corporate consultantsFor matters involving the enforcement of compensation, you can refer to the following for reference.Creditor's rights and debts, and enforcement casesColumn.

VI. Frequently Asked Questions

Q1: How should we understand the rule of predictability of compensation?

It means that the compensation for breach of contract shall be limited to the losses that the breaching party foresaw or should have foreseen at the time of entering into the contract. Losses exceeding this scope will generally not be supported.

Q2: When can we determine that something is foreseeable?

The court shall determine whether the breaching party could have foreseen the corresponding losses based on the information and understanding they had at the time the contract was concluded, rather than at the time of the breach of contract.

Q3: By whose standards should we judge?

It shall be judged based on the breaching party's understanding and combined with industry common sense and transaction practices to determine the scope that the breaching party should have foreseen, rather than based on the actual losses suffered by the complying party.

Q4: If the loss is far greater than the other party's expectations, can they be compensated for it?

It depends on whether it falls within the foreseeable scope. For abnormal losses arising from special purposes, it is usually difficult to obtain support if the other party has not been informed in advance.

Q5: How can we reduce this risk?

When concluding a contract, it is necessary to clarify the purpose of the contract and the scope of losses, notify the other party in writing of any special purposes in advance, and agree on the method of calculating the breach of contract penalty or compensation to reduce disputes.

The above answer is based on the judicial practice in the Beijing area. The adjudication standards in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with evidence materials, to avoid missing the statutory time limit. →Corporate commercial legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.