Article 743
If the lessor fails to exercise its right to claim compensation against the seller under any of the following circumstances, the lessee has the right to request the lessor to bear the corresponding liability:
(1) Knowing that the leased property has quality defects and failing to inform the lessee;
(2) When the lessee exercises the right to claim compensation, it fails to provide necessary assistance in a timely manner.
If the lessor neglects to exercise its right to claim compensation that can only be exercised by the lessor against the seller, resulting in losses to the lessee, the lessee has the right to request the lessor to bear the liability for compensation.
I. Purpose of this Article
This article is a provision on the lessor's liability when it obstructs or neglects to make a claim.
II. Evolution of the Provisions
From the perspective of legal provisions, article 240 of the original Contract Law stipulates that the lessor shall assist the lessee in exercising its right to claim compensation under the sales contract. However, the specific manifestations of the above-mentioned obligation to assist and the specific circumstances of violating the obligation to assist are not consistent in the course of theoretical and practical operation. In March 2014, Article 18 of the original Interpretation of Financial Lease Contracts clarified this, specifically listing four circumstances in which the lessor may breach its obligation to assist. The Civil Code absorbs this and stipulates that the lessor shall be liable for the specific circumstances that hinder the lessee from exercising the right to claim in accordance with the contract, which is convenient for practical operation, and is also conducive to the lessor and the lessee to clarify their respective rights and obligations in accordance with the law in the process of exercising the right to claim, and to form a unified understanding of the issue in theory and practice.
3. Interpretation of Provisions
This article is a provision that the lessor shall be liable for the failure of the lessee to exercise its right to claim compensation.
In a financial lease contract, the right to claim for breach of contract by the seller in delivery of the subject matter of the sales contract belongs to the lessee in principle, so if the lessee fails to exercise the right to claim compensation, the lessee shall bear the responsibility for the consequences. Only if the lessor breaches its obligations and the lessee fails to exercise its right to claim compensation against the seller, the lessor shall be liable, and the lessee shall have the right to demand that the lessor bear the liability for compensation. The reasons for the lessor's failure to exercise its right to claim are:
1. Knowing that the leased property has quality defects and failing to inform the lessee will make the lessee unable to find out the quality defects of the subject matter due to the lessor's inaction, so that the lessee will not be able to exercise the right to claim in time, resulting in the overdue claim.
2. The lessee's failure to provide necessary assistance in a timely manner when exercising the right to claim compensation violates the lessor's obligation to assist the lessee in its claim, which is also the reason for the failure of the claim.
In the event of one of these two circumstances, the lessee has the right to claim its liability against the lessor.
In the financial lease contract or sales contract, it is stipulated that the lessor can only exercise the right to claim compensation against the seller, and the lessee has no right to exercise it, but can only exercise it by the lessor. If the lessor neglects to exercise the right to claim compensation, causing damage to the interests of the lessee, the lessee has the right to require the lessor to bear the corresponding liability for compensation.
4. Cases
Duan et al. v. PowerChina Leasing Co., Ltd., a financial lease contract dispute
Facts: The power construction company was changed from China Hydropower Construction Group Leasing Holding Co., Ltd. (hereinafter referred to as the "hydropower leasing company") in September 2014, and the hydropower leasing company was renamed from China Hydropower Construction Group Leasing Co., Ltd. in December 2005. On January 16, 2006, the hydropower leasing company signed the "Construction Machinery Leasing Contract" with Duan. Regarding Duan's claim in the litigation of this case on the grounds that there were quality problems with the excavator involved in the case, and in 2015 he submitted a claim letter to the power construction company requesting the latter to exercise the right to claim compensation from Xinxing Company, and submitted a claim letter to Xinxing Company, the court ruled that Article 244 of the Contract Law of the People's Republic of China stipulates: "If the leased object does not conform to the agreement or does not conform to the purpose of use, the lessor shall not be liable, except where the lessee relies on the lessor's skills to determine the leased object or the lessor intervenes in the selection of the leased object." "Duan's lawsuit against the lessor, Power Construction Company, to bear the liability for compensation without any legal obstacle to exercising the right to claim for quality problems, is an error of the subject and should be dismissed.
5. Analysis
Pursuant to Article 743 of the Civil Code, the lessor shall be liable to the lessee if it fails to inform the lessee of the defects in the quality of the leased property, or if the lessee fails to provide necessary assistance in a timely manner when exercising its right to make a claim, or if it neglects to exercise the right of claim against the seller as stipulated in the financial lease contract or the sales contract, and causes the lessee to make a late claim against the seller or the claim fails. In this case, Duan's claim that the claim had failed on the grounds that the claim letter had not been replied to by the emerging company could not be established, nor could it be proved that the power construction company had the above-mentioned statutory circumstances that caused it to make a late claim against the emerging company or failed to make a claim, so it should be liable for compensation. Therefore, Duan had the right to directly claim quality compensation from the emerging company and only sent a letter of claim to the emerging company but did not receive a reply, but did not meet the conditions for filing a lawsuit for the power construction company to bear the corresponding liability required by Article 743 of the Civil Code.