Talk about the determination of the residual value of the crop in the contracting case

In the contracting type, it is often encountered that the contractor has made an appeal to terminate the contract for any reason after signing the contract. In the case that the contractor requires continued performance that is difficult to achieve, it will generally require the contractor to bear the liability for breach of contract or compensate for the loss, and at this time, the contractor has invested in the semi-finished products/equipment that have been completed at cost, and even how to dispose of the finished products/equipment and the determination of value, which has become an unavoidable problem.

1. Ownership

1 . Of course, it would be best if the two parties to the dispute could agree that the semi-finished equipment/finished equipment was handled by one party, but obviously this is only the ideal state, and the semi-finished equipment/finished equipment is difficult to be attractive to both the contractor and the contractor, otherwise there will be no dispute.

2 . Semi-finished products/equipment. If the contractor has not yet completed the finished product/equipment, considering that the semi-finished product/equipment is still in the hands of the contractor at this time, in order to avoid secondary costs such as transportation, warehousing, etc., and it is clear that the contractor has more possibilities to reuse the semi-finished product, the court prefers to hand over the semi-finished product/equipment to the contractor.

3 . Finished product/equipment. If the contractor has completed all the finished products, that is, basically completed the contractual obligations (most contracts require the contractor to perform the obligations of installation, commissioning, maintenance, etc.), the court may also assign the finished product judgment to the owner, so that the biggest advantage is that while protecting the contractor's trust interests, the referee does not need to consider the residual value issue.

2. Residual value

Theoretically, any semi-finished equipment / finished product equipment has a certain residual value, since there is a residual value, if the ownership of semi-finished equipment / finished equipment belongs to the contractor, then the contractor deducts the corresponding residual value while calculating the loss or obtaining the payment for the goods, if it is attributed to the person, the contractor's loss or payment does not need to consider the residual value deduction, otherwise there is a suspicion that the contractor has double profits.

Regarding the method of calculating the residual value, there are few detailed provisions in the current law, and there are roughly two judicial interpretations that can be referred to (when the Civil Code and its supporting interpretations are promulgated, the effect of the judicial interpretation is not there, and only the pricing method is discussed here):

First, Article 20 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Marriage Law of the People's Republic of China states that when the two parties are unable to reach an agreement on the value and ownership of the house in the couple's common property, the people's court shall handle it separately according to the following circumstances: (1) If both parties claim ownership of the house and agree to bid for it, it shall be allowed; (2) if one party claims ownership of the house, the appraisal agency shall assess the house according to the market price, and the party who has acquired the ownership of the house shall give the other party corresponding compensation ;(3) If neither party claims the ownership of the house, the house shall be auctioned according to the application of the parties and the proceeds shall be divided.

Second, article 23 of the Interpretation of the Supreme People's Court on Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Financial Lease Contracts states that if there is a dispute between the lessee and the lessor over the value of the leased property during the litigation period, the people's court may determine the value of the leased property in accordance with the provisions of the financial lease contract; if the financial lease contract is not agreed or the agreement is unclear, the value of the leased property may be determined by reference to the depreciation of the leased property agreed in the financial lease contract and the residual value of the leased property after the contract expires. Where the lessee or lessor finds that the value determined in accordance with the preceding paragraph seriously deviates from the actual value of the leased property, it may request the people's court to entrust a qualified institution to assess or auction it.

Although the two provisions have a certain reference role in determining the salvage value in the contracting contract, they are very limited, after all, the semi-finished equipment/finished equipment is different from the real estate under the marital relationship, and the real estate as the property with the most preserved value in social life, the "Buddhist" attitude of both parties to the dispute that does not matter what it belongs to is almost non-existent, in addition, unlike the financial lease contract, the residual value agreement on the semi-finished equipment/finished equipment in the contracting contract is often blank, in practice, There are three main types of methods for adjudication organs to determine the salvage value:

1 . Consensus. Although the probability of good wishes being fulfilled is extremely low, it is undeniable that this is the preferred method of determining the residual value, and the judicial organs are very willing.

2 . Price appraisal. This is the most calculated method used in the determination of salvage value in litigation. An appraisal opinion issued by a third-party institution with judicial appraisal qualifications can greatly reduce the difficulty of adjudication of different subject matter for adjudicators. However, the basis and method of appraisal by the appraisal agency may not necessarily reflect the true value of the specimen at some times. In judicial practice, some appraisal institutions conduct depreciation accounting in accordance with Article 60 of the Implementing Regulations of the Enterprise Income Tax Law. The author believes that this approach is debatable.

According to Article 60 of the Implementing Regulations of the Enterprise Income Tax Law, unless otherwise provided by the competent departments of finance and taxation under the State Council, the minimum period for calculating depreciation of fixed assets is as follows: (1) 20 years for houses and buildings; (2) 10 years for aircraft, trains, ships, machinery, machinery and other production equipment; (3) 5 years for appliances, tools, furniture, etc. related to production and business activities; (4) 4 years for means of transport other than airplanes, trains and ships; and (5) 3 years for electronic equipment. However, the Implementing Regulations of the Enterprise Income Tax Law are designed for pre-tax deductions and are not designed to calculate the residual value of equipment. The Straight Line Method, also known as the average age method, refers to a method in which the depreciation of fixed assets is calculated equally based on the estimated useful life and is evenly distributed to each period. The depreciation amount for each period (year, month) calculated using this method is equal. In practice, it is obvious that the depreciation rate of machinery and equipment is closely related to the frequency of use, maintenance methods, and operating habits, and the new rate is simply calculated from the practice of equal sharing of the number of years, and it is impossible to accurately judge the amount of the residual value of the equipment.

The Notice on Issues Concerning the Treatment of Accelerated Depreciation Income Tax on Fixed Assets of Enterprises, which came into effect on 1 January 2008, specifically implemented by the State Administration of Taxation, makes it clear that fixed assets such as equipment can shorten the depreciation period or adopt accelerated depreciation. In addition, on September 25, 2015, the State Administration of Taxation issued The Announcement No. 68 of 2015 on Issues Related to the Further Improvement of the Enterprise Income Tax Policy for Accelerated Depreciation of Fixed Assets, which clearly stipulates that for the fixed assets (including self-construction, the same below) newly purchased by enterprises in the four key industries of light industry, textile, machinery and automobiles (hereinafter referred to as the four key industries) after January 1, 2015, it is allowed to shorten the depreciation period or adopt accelerated depreciation methods to purchase new fixed assets. The minimum depreciation period shall not be less than 60 per cent of the depreciation period provided for in Article 60 of the Implementing Regulations; Unfortunately, appraisal opinions on calculating the new rate of equipment and products in accordance with the Implementing Regulations of the Enterprise Income Tax Law abound.

Therefore, even if an appraisal body is entrusted with a price assessment of products and equipment, the adjudication organs and parties still cannot take it lightly, and should pay attention to their assessment methods and basis, adopt and raise objections as appropriate. When necessary, adjudication organs may submit judicial suggestions to appraisal bodies and the competent organs of appraisal bodies, suggesting that assessment methods be improved, that the appraisal process be upgraded, and at the same time raise the threshold for access of forensic appraisal bodies, avoid unreasonable deviations between the appraisal value and the actual value, and also help the adjudication organs reduce the burden of adjudication, ensuring that the trial results are more in line with justice and closer to fairness.

3 . At the discretion of the court. In some cases, due to the damage of the subject matter or the difficulty of appraisal, it is difficult to determine the residual value part, but the value exists objectively, and it is undoubtedly unfair to reject the request of the parties or not to identify it based on this alone, in this case, the adjudicator has to determine the residual value as appropriate, but the discretionary determination is not arbitrary, and it is generally based on the corresponding factual basis.

In the civil judgment of the People's Court of Hai'an City, Jiangsu Province (2018) Su 0621 Min Chu No. 1160, the court held that Yilu Company confirmed that the broken shaft was 50 tons, and under the premise of supporting its aforementioned losses, the broken shaft should be returned to Haijian Company, but the shaft was secretly sold by Yilu Company employees, leaving only a small part, and there was no way to completely return it to Yilu Company. Combined with the statements of the parties that the scrap price is about 2000-2300 yuan and the bearing price roller is lower, it is determined to calculate the shaft system residual value according to 2150 yuan / ton, a total of 107500 yuan.

In the Yangzhou Intermediate People's Court (2013) Yangshang Chuzi No. 0028 Civil Judgment, the court held that, as far as the residual value of the 16 cranes was concerned, the court entrusted the assessment agency to assess the residual value of 16 cranes, while the evaluation agency only assessed the residual value of the steel structure of the 16 cranes as 1709072 yuan, and the other purchased parts were not evaluated. Other purchased parts are the supporting products purchased by the 16 cranes, which have been purchased for at least more than a year, because they have a corresponding warranty period, and if they are used again, the cost of dismantling and returning to the factory is also high, so it is not appropriate to calculate its value based on the purchase price. The 16 cranes are customized products, specifications, models have special requirements, according to the current market situation is difficult to resell others in the short term, and the crane modification cost is high, and there may not be other buyers willing to buy modified products. According to the residual value of 16 cranes recognized by The Company of Gretel minus the assessed residual value of the steel structure, the balance obtained is the residual value of other purchased parts (2463494 yuan - 1709072 yuan = 754422 yuan), and the court found that this amount was within a reasonable range after visiting and investigating. Although Universal raised objections, it did not produce evidence to prove that the residual value of the 16 cranes was higher than the value recognized by Gretel, and Universal was unwilling to accept the equipment, and confirmed that the residual value of the 16 cranes was 2463494 yuan according to law.

epilogue

The determination of the residual value of products and equipment is a difficult problem for the court, as a party and agent, they should try to supplement the adjudicator with price support, such as manufacturing costs, expected profits, market conditions, industry data, upstream and downstream prices, and at the same time, do not trust and argue more about the price appraisal, and as adjudicators, they should pay attention to the flexible use of appraisal and discretion, as far as possible to ensure fairness and justice in the adjudication, and resolve disputes at one time.

Source: Trial Studies