On the Compensation for the Loss of Transaction Opportunity in Culpa in Contrahendo: From the Perspective of Chinese Judicial Practice

Abstract

The compensability of the loss of transaction opportunity under the doctrine of culpa in contrahendo (contracting negligence) has long perplexed Chinese legal theory and judicial practice. From the perspective of judicial practice, the Supreme People’s Court explicitly ruled in the Shenzhen Biaobang case that an ‘objectively reasonable loss of transaction opportunity’ falls within the scope of compensation. Conversely, many local courts reject such claims on the grounds of the ‘uncertainty of transaction opportunities’ or their ‘exclusion from reliance interests’. These two opposing stances reflect a profound tension between reliance interest and expectation interest, as well as between the requirement of certainty and the compensatory function of damages. Awarding limited compensation for the loss of transaction opportunity can reduce opportunity-capturing costs and deter opportunistic behavior, thereby possessing efficiency justification from a law and economics perspective. In terms of institutional construction, the foreseeability of the opportunity loss by the party at fault should serve as the threshold condition for application. Courts should differentiate among four scenarios involving variables of third-party conduct and comprehensively weigh factors such as the probability of realizing the opportunity, the degree of reliance investment, and the benefits gained by the at-fault party to achieve a flexible and dynamic compensation mechanism.