Study On Terminating Right Caused By Breach Of Collateral Obligations

Obligations are the key definition in contract law. To some extent,the development of modern contract law is actually the development ofobligations. Collateral obligations are firstly regulated by Contract Lawof the People’s Republic, but research in it is not yet mature. The typesof collateral obligations are controversial. Whether breach of collateralobligation leads to terminating right or not is also in dispute.Thisthesis focus on the relations between collateral obligations and legalterminating right and is divided into five parts.The first section introduces the present legislation of collateralobligation and typical cases on it. The controversial views on the legaleffect of breach of collateral obligations will then be concluded. Thecores of the discussion are: whether breach of collateral obligation leadsto terminating right or not; if there is a terminating right, what is theconstitutive elements.The second section analyzes the basic theory of collateral obligation.The analysis is from three different points: theory，cases and legislation.Then comparisons between collateral obligation and other concepts suchas obligation of subordinate performance will then be made.In the third section of the thesis, the concept, characteristics and types of the collateral obligation will be explained. There are different viewson them. By comparing the views of scholars in Germany, Japan, Taiwandistrict and Chinese mainland, this section will then define the term ofcollateral obligation.The fourth section is on the problem: whether breach of collateralobligation of one party leads to terminating right of the otherparty.German legislation gives a positive answer. Article324of GermanCivil Law provided that, if, in a bilateral contract, the debtor breachesthe obligation regulated by paragraph2of article241(namely collateralobligations), and if it is no longer reasonable for the creditor tomaintain the contract, then the creditor has the right to terminate thecontract. In Japan, most scholars hold a negative view to this discussion.They maintain, if the breach of collateral obligation leads to terminatingright, then the collateral obligation is no more the collateral obligation,but the obligation of Performance. In Taiwan district, the scholars havethree kinds of views: positive, negative and compromise. Most scholarsof Chinese mainland hold a positive view. This thesis is in favor ofcompromise theory.The fifth section analyses the judicial cases. Then a conclusion willbe made: only when the breach of collateral obligation leads to thefrustration of contract purpose or the loss of contract bases, can theother party terminate the contract according to paragraph4of article94of Chinese Contract Law.