Understanding And Application Of The Creditor Right Of Rescission

The creditor's right of rescission is part of the content of debt preservation. Debt preservation system is a civil law system that guarantees the repayment of debt by way of maintaining the value of the debtor's liability assets. The creditor's right of rescission as stipulated in the Contract Law of the PRC, is only a technically alternative method adopted in the civil law legislation in the PRC. Although it provides the legal basis for the creditor to exercise its right of rescission, it is only applicable in the preservation of debts arising from contracts. Currently the exercise of the right of rescission is subject to strict conditions, and the existing laws and regulations lacks explicit stipulations on some of the conditions while other conditions are too strict to the creditor. Therefore, the system of the right of rescission in civil law needs further stipulation by future legislation or judicial interpretations. By tracing back to the origin of the system of the right of rescission, by way of comparing the theories existing in different nations, and after comprehensive integration of the current state of legislation of our country, this article mainly conducts a comparative research on several issues existing in the difficult problems of the current system of right of rescission, such as the characteristics, basic elements of establishment, conditions and scope of exercising the right of rescission, parties to the rescission action, effects of exercising the right of rescission and the rights and obligations of the opposing parties.In the judicial practice, there are always situations where the debtor conducts act of disposal on the assets by adopting the way other than those stipulated in the laws and regulations, which may harm the creditor's right. By conforming to the objective and spirit of the legislation of the creditor's right of rescission, this article contends that only by reasonable extension of the application of right of rescission will it be able to maintain the principles of fairness and honesty, so that the right of rescission can truly meet the internal requirements when designing such system. Since the unspecified total assets of the debtor will become the general guarantee to the repayment of debt after the establishment of the relationship of the rights and obligations between the creditor and the debtor, the unspecified total assets of the debtor to be used as the guarantee to the repayment of debt, including the tangible and intangible assets, shall be named as the "Liability Assets". Any change to the value of the Liability Assets will affect the opportunity of the repayment of debt. When the debtor improperly disposes his/her property or right, the Liability Assets of the debtor will be reduced accordingly and the danger that debt can not be totally repayment will be enhanced and the legitimate interests of the creditor will be harmed. This article has systematically analyzed and gradually interpreted the theoretical issues with respect to whether the creditor's right as the exercising condition of the right of rescission must be reaching the period of repayment, the classification and proof of improper acts of disposal, ill faith of actors, the effects of the right of rescission and the rights and obligations of the opposing party under different circumstances. Furthermore, there are great differences in the theories of different nations on the characteristics of the right of rescission and the main theories are the claim right theory, formation right theory and compromise theory. There are different standpoints in each theory as well. By analyzing the afore-mentioned theories, this article contends that the third standpoint in the formation right theory, the liability theory, is comprehensive. In general, the parties to the rescission action shall depend on the characteristics and effects of the right of rescission. Because the three aforementioned theories have different opinion on the characteristics of the right of rescission, there...