Lufa case [2024] 220
A port company in Laizhou v. a pipe pile company in Laizhou and other lease contract disputes
-- Determination of whether the contract should be terminated when the termination conditions agreed in the contract are fulfilled
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Summary of the trial
In the lease contract relationship, the lessor's main payment obligation is to deliver the agreed leased property, and the lessee's main payment obligation is to pay the rent on time. If the lessee fails to pay or delays in paying the rent without justifiable reasons, the lessor may require the lessee to pay within a reasonable period of time. If the lessee fails to pay within the time limit, the lessor may terminate the contract. Where the non-breaching party requests to terminate the contract when the conditions for termination stipulated in the contract are fulfilled, the people's court shall examine whether the breaching party's breach of contract is significantly minor, whether it affects the realization of the non-breaching party's purpose of the contract, and determine whether the contract should be terminated.
Basic facts of the case
The plaintiff, a port company in Laizhou, claimed that according to the contract between the two parties, the lessee failed to pay the rent within the time limit. Therefore, it is requested to order: (1) to terminate the lease contract; (2) to confirm that the lease contract signed between a pipe pile company in Laizhou and the port and sea company is invalid; (3) a pipe pile company in Laizhou should immediately vacate and lease the port wharf yard of a port company in Laizhou located in the Xihai District of Zhujia Village; (4) a pipe pile company in Laizhou shall pay a rent of 1,483,835.61 yuan and a port miscellaneous fee of 100,000 yuan, totaling 1,583,835.61 yuan; (5) a pipe pile company in Laizhou shall bear the interest loss on overdue payment since November 1, 2018; From September 8, 2020 to the date of termination of the contract, a pipe pile company in Laizhou continued to pay rent at the rate of 800,000 yuan per year; 7. A pipe pile company in Laizhou paid the occupation and use fee to a port company in Laizhou at the rate of 800,000 yuan per year from the date of termination of the contract to the date of actual vacancy; 8. A pipe pile company in Laizhou bore all the litigation costs in this case.
A pipe pile company in Laizhou argued that the lease contract was a long-term contract of 20 years, and the lease term was just half of the term, and a pipe pile company in Laizhou had invested heavily in construction and had not yet recovered its costs. A pipe pile company in Laizhou needs to continue to use the port for production and transportation, and requires to continue to perform the contract. In the process of performing the lease contract, a pipe pile company in Laizhou basically abides by the contract and pays the lease fee every year. In recent years, due to external reasons and the epidemic, rent arrears are excusable, and a pipe pile company in Laizhou has the sincerity and ability to continue to perform the contract.
Heard by the courts
After trial, the court ascertained that on November 1, 2011, a port company in Laizhou (Party A) and a pipe pile company in Laizhou (Party B) signed a "lease contract" The lease period is 20 years, from November 1, 2011 to October 31, 2031, the rent is 800,000 yuan per year, and the rent of the next year shall be paid before the corresponding date of the contract signing each year, and the rent of the next year shall be paid before the corresponding date of the contract signing each year, and Party A shall have the right to unilaterally terminate the contract and take back the leased property without the consent of Party A and without justifiable reasons for not paying the rent according to the agreement. During the performance of the contract, a pipe pile company in Laizhou built a two-story office building, three groups of cement silos, six medium-sized and small gantry cranes, and built a U-shaped wharf on the leased site. On April 7, 2020, a port company in Laizhou issued a reminder letter to a pipe pile company in Laizhou, stating that: according to the provisions of the Lease Contract, a pipe pile company in Laizhou should pay off the rent of 1.6 million yuan from October 31, 2018 to November 1, 2020 before November 1, 2019, and as of the date of the issuance of this reminder letter, a pipe pile company in Laizhou owed 1.6 million yuan in rent. The port miscellaneous charges were 89,117.90 yuan, totaling 1,689,117.90 yuan, and 1,689,117.9 yuan was paid in full to a port company in Laizhou within three days from the date of receipt of this letter.
On January 8, 2021, the Qingdao Maritime Court rendered the (2020) Lu 72 Min Chu No. 1967 Civil Judgment: (1) a pipe pile company in Laizhou shall pay a lease fee of RMB 1,483,835.61, a port miscellaneous fee of RMB 10,000 and interest to a port company in Laizhou within 10 days from the effective date of the judgment; After the judgment was pronounced, a port company in Laizhou appealed on the grounds that the lease contract should be terminated. On April 23, 2021, the Shandong Provincial High People's Court rendered the (2021) Lu Min Zhong No. 477 Civil Judgment: (1) to uphold the first item of the first-instance judgment, (2) to revoke (3) to revoke the third item of the first-instance judgment, (3) to confirm the termination of the Lease Contract, (4) to deliver the port terminal to a port company in Laizhou within three months from the effective date of the judgment, and (5) to reject the other litigation claims of a port company in Laizhou.
Grounds for the Trial
The effective judgment of the court held that there were two points of dispute in this case. Including: first, whether the lease contract should be terminated, and second, whether a pipe pile company in Laizhou should return to its leased port terminal yard.
1. Whether the lease contract involved in the case should be terminated
The lease contract involved in the case stipulates the conditions for the termination of the contract, that is, "the rent is 800,000 yuan per year, and the rent of the current year shall be paid on the date of signing the contract, and the rent of the next year shall be paid before the corresponding date of the contract signing in the future, and the rent shall be paid first and then used." Without the consent of a port company in Laizhou, and without justifiable reasons for not paying the rent as agreed, a port company in Laizhou has the right to unilaterally terminate the contract and take back the leased property." A pipe pile company in Laizhou has not paid rent for three years, and a port company in Laizhou has notified a pipe pile company in Laizhou in writing to pay rent, and a port company in Laizhou has the right to terminate the contract if a pipe pile company in Laizhou still does not pay the rent. A pipe pile company in Laizhou owes three years of rent, and the company has a number of other debts pending payment of enforcement rulings, and the people's court has determined through the enforcement ruling that a pipe pile company in Laizhou has no property available for enforcement, and a pipe pile company in Laizhou has lost the ability to continue to perform the contract. During the trial, the court of second instance proposed a plan to postpone the payment of rent, but a pipe pile company in Laizhou could not give a clear performance period or provide an effective guarantee, and it was impossible to continue to perform the contract. The above facts show that the breach of contract by a pipe pile company in Laizhou is not significantly minor, and as the lessor of the lease contract, the purpose of the contract in which a port company in Laizhou collects rent by leasing the leased property has been unable to be realized. After investigation, in this case, the rent owed by a port company in Laizhou included both the rent during the epidemic period and the rent before the outbreak of the epidemic, and it was mainly the rent before the outbreak of the epidemic. In summary, the grounds for a port company in Laizhou to request the termination of the contract by way of litigation are established, and the "Lease Contract" should be terminated.
2. Whether a pipe pile company in Laizhou should return its leased port terminal yard
After the contract was terminated, the leased property, i.e., the cargo yard of the port involved in the case, should be returned to a port company in Laizhou, but a reasonable preparation time should be given for a pipe pile company in Laizhou to evacuate the site, and the court of second instance comprehensively considered and confirmed that it was limited to three months, that is, a pipe pile company in Laizhou should deliver the cargo yard of the port involved in the case to a port company in Laizhou within three months from the effective date of this judgment.
Links to legal provisions
Article 721 of the Civil Code of the People's Republic of China The lessee shall pay the rent within the agreed period. If there is no agreement on the term of rent payment or the agreement is not clear, and it is still uncertain in accordance with the provisions of Article 510 of this Law, if the lease term is less than one year, it shall be paid at the expiration of the lease term; if the lease term is more than one year, it shall be paid at the expiration of each year, and if the remaining term is less than one year, it shall be paid at the expiration of the lease term. (Article 226 of the Contract Law of the People's Republic of China, which came into effect on October 1, 1999, applies in this case)
Article 566 of the Civil Code of the People's Republic of China: After the contract is terminated, if the contract has not been performed, the performance shall be terminated;
If the contract is terminated due to breach of contract, the person with the right to terminate may request the breaching party to bear the liability for breach of contract, unless otherwise agreed by the parties.
After the termination of the main contract, the guarantor shall still bear the guarantee liability for the civil liability to the debtor, unless otherwise agreed in the guarantee contract. (Article 97 of the Contract Law of the People's Republic of China, which came into effect on October 1, 1999, applies in this case)
First instance: Qingdao Maritime Court (2020) Lu 72 Min Chu No. 1967 Civil Judgment (January 8, 2021)
Second instance: Shandong Provincial High People's Court (2021) Lu Min Zhong No. 477 Civil Judgment (April 23, 2021)