Yue said that the contract | How to determine the time of termination of the contract in the case of judicial termination of the contract?
【Zhuhai lawyer, Zhuhai legal consultation, Zhuhai law firm, Jingshi law firm, Jingshi Zhuhai law firm】
整合 | 京师杭州律所媒体部
Source | Jingshi Hangzhou Law Firm
■Beijing Jingshi (Hangzhou) Law Firm
Declarations
1. The purpose of this column is to popularize the Civil Code and exchange and learning, and the views in the article only represent the author's own and are for reference only.
2. In order to concisely explain the problem, the column will make appropriate modifications or simplifications of the cases taken to make the focus highlighted, which is hereby explained.
How to determine the time of termination of the contract in the case of judicial termination of the contract?
2024/4/16
Unless otherwise specified, the legal provisions of this article refer to the Civil Code.
For the confirmation of the time of judicial termination of the contract, let's first look at the following cases:
Case 1: The court held that when Yu repeatedly expressed his unwillingness to continue to perform the contract, a cultural communication company's insistence on continuing to perform the contract had adverse consequences for both parties. The parties to the contract have reached an impasse over the performance of the contract. Therefore, Yu's claim to terminate the contract through litigation was supported in accordance with the law. The Exclusive Agency Agreement was terminated on the date of the judgment. The court of second instance upheld the original judgment (see [2021] Hu 01 Min Zhong No. 5062 Civil Judgment).
Case 2: The court held that Dragon Company, as the breaching party, did not have malicious ,...... in respect of its breach of contract; As the non-breaching party, Glorious Sun Company failed to demand performance within a reasonable period of time, and at the same time refused to terminate the contract, which obviously violated the principle of good faith. In the event of such a contract deadlock, Dragon Company's lawsuit to terminate the contract has a factual and legal basis, and this court supports it. The contract involved in the case was terminated when Dragon Company's claim for termination of the contract reached Glorious Sun Company. (See [2021] Hu 01 Min Zhong No. 2526 Civil Judgment).
Case 3: The court held that, as for the determination of the time of termination of the contract, Bestway claimed that the time of termination of the contract was the time of its withdrawal, i.e., February 29, 2020, and that it claimed to terminate the contract as the breaching party, and that the withdrawal of the store was its unilateral act, which should not be determined as the time of termination of the contract, and that it was more appropriate for the lessor to release a new lease advertisement as the time of termination of the contract, so it was determined that the parties terminated the Site Use Contract on March 8, 2020 (see [2020] Chuan 13 Min Zhong No. 1908 Civil Judgment). The focus of the above case is how to determine the time of termination of the contract in the case of judicial termination.
With regard to contract termination, we are familiar with the exercise of the right of termination by the parties (i.e., statutory termination, agreed termination, and negotiated termination). The Civil Code provides for a new method of rescission of the contract, namely judicial rescission (some refer to it as the right of rescission of the breaching party). Judicial rescission has solved the contract deadlock very well (referring to the fact that the non-breaching party has the right to terminate the contract but does not exercise it, the breaching party cannot continue to perform its debts, and there is no right to terminate the contract, and there is no malicious breach of contract, and the two parties are in a deadlock), but for the confirmation of the time of judicial termination of the contract, due to the flexibility of the law, the views of judicial adjudication are not uniform. In this issue, we will talk about this topic in combination with the relevant laws and regulations of the Civil Code.
1. On judicial dissolution
Paragraph 2 of Article 580 of the Civil Code stipulates that "if one of the parties fails to perform a non-monetary debt or the performance of a non-monetary debt does not conform to the agreement, the other party may request performance, except in any of the following circumstances: (1) it is legally or factually impossible to perform; (2) the subject matter of the debt is not suitable for compulsory performance or the cost of performance is too high; (3) the creditor fails to request performance within a reasonable period of time."
Where there are any of the exceptions provided for in the preceding paragraph, which makes it impossible to achieve the purpose of the contract, the people's court or arbitration institution may, at the request of the parties, terminate the relationship of rights and obligations in the contract, but this does not affect the assumption of liability for breach of contract. "This provision provides for judicial dismissal.
The preconditions for the application of judicial rescission are: first, the other party cannot request the breaching party to continue to perform the non-monetary debt, second, the non-performance of the non-monetary debt makes it impossible to achieve the purpose of the contract, and finally, the party applies to the court or arbitration institution for judicial rescission (in practice, the application is usually made by the breaching party, and the non-breaching party can directly exercise the statutory right of rescission). It should be noted that the purpose of the judicial termination system stipulated by the law is not to punish the breaching party (the current legal system already has a very adequate remedy system for the actual party, such as requiring the breaching party to bear liquidated damages, bear damages for breach of contract, etc.), but from the perspective of economic operation, when the contract has reached a deadlock, under the condition of protecting the interests of creditors, the contract is terminated, so that both parties can travel lightly, which is conducive to the parties to regain the freedom of transaction and improve the overall economic efficiency.
2. Determination of the time of contract termination under different termination methods
Next, let's take a look at the provisions on the time of contract termination under different termination methods (party termination and judicial termination).
For the confirmation of the time of termination of the contract if the parties terminate the contract, the Civil Code Article 565 clearly stipulates three situations: first, if one party claims to terminate the contract in accordance with the law, it shall notify the other party, and the contract shall be terminated when the notice reaches the other party; second, one of the parties has already enjoyed the right to terminate the contract in accordance with the law, and for some reasons, the party enjoying the right of rescission does not immediately exercise the right of rescission, but grants the other party a certain grace period, and states in the notice that if the debtor fails to perform its obligations within the grace period, the contract shall be automatically terminated, and if the debtor fails to perform its obligations within the grace period, the contract shall be terminated upon the expiration of the grace period; and third, if one of the parties fails to notify the other party, it directly claims to terminate the contract by filing a lawsuit or applying for arbitrationIf the court or arbitration institution confirms the claim, the contract shall be terminated when the copy of the complaint or the copy of the application for arbitration is served on the other party, and if the court does not confirm the claim, the contract shall continue to be performed and there shall be no termination of the contract.
The Civil Code does not provide for the confirmation of the time of termination of a contract for judicial termination, and Article 59 of the Interpretation of the General Principles of Contract Codification of the Civil Code provides for two situations. First, the court should generally take the time when the copy of the complaint is served on the other party as the time when the contractual rights and obligations are terminated (i.e., the time of termination of the contract). Second, based on the specific circumstances of the case, if it is more in line with the principles of fairness and good faith to use other times as the time for the termination of the contractual rights and obligations, the court may use that time as the time for the termination of the contractual rights and obligations, but this shall be fully explained in the judgment documents. Because judges have different understandings and determinations of what is meant by "the specific circumstances of the case", as well as the "principle of fairness" and "principle of good faith", there are also situations in practice where the determination of the time of judicial termination of the contract is different, as in this case.
3. The principle of "the time when the copy of the complaint is served on the other party shall be the time of termination of the contract" shall be taken as the principle of judicial termination
There are two views on the determination of the time of judicial rescission in practice: one is the court's discretionary theory, which holds that the time for rescission of the contract applied by the breaching party should not be determined by the law or judicial interpretation, but should be determined by the judge according to the specific circumstances of the case, so as to avoid unfair adjudication results. The other is the fixation of dates, which suggests that, in this context, the law should fix a reasonably specific date, rather than leaving it entirely to the discretion of the judge.
My preference is that the definite date should be used, and that the definite date should be the time when a copy of the complaint is served on the other party. The main reasons are: first, the determination of the date can better realize the value judgment of the judicial termination system; second, the determination of the date can have a good expectation for the parties; and third, the determination of the date can achieve the same judgment in the same case. At the same time, in the face of some special circumstances, if it is obviously unfair to the parties to use the time when the copy of the complaint is served on the other party as the time for the termination of the contract, the court can classify some similar cases according to the "specific circumstances of the case", so as to make the application of law uniform.
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Lawyer Profile
Li Yue is a lawyer at Beijing Jingshi (Hangzhou) Law Firm
Education Background: Master of Laws, East China University of Political Science and Law
Areas of Expertise:
1. Bankruptcy legal practice and research on civil and commercial rights and interests disputes
2. Publications: "New Common Knowledge of Contracts - Interpretation of 66 New Rules of the Contract Part of the Civil Code"