Creditor’s Anticipatory Repudiation In China And Germany

Paragraph 2 of article 94 and article 108 of the contract law of the People’s Republic of China has adopted anticipatory breach of contract in the Anglo American legal system. However, the legislation has changed the original meaning of the anticipatory breach of contract. At the same time, there are conflicts between anticipatory breach of contract and the unstable counter-argument. One of the most typical cases of anticipatory breach of contract is that the debtor has refused the performance before the expiration of the contract. Under this situation the creditor is always not sure, which legal remedies he has. The most important reason of the problem is the wrong interpretation on the nature of the debtor’s acts. The German Civil Code has identified the behavior of the debtor as a performance obstacle. If the creditor continues the performance of the contract, he can exercise the unstable counter-argument as a defense. The behavior of the debtor has been a kind of uneasy reasons. Conversely, the creditor can exercise the right of cancellation and right of action for the recovery of damages. In addition, according to the German law the creditor can ask the debtor to say if he will obey the contract or not. In this way, the doubts of the creditor on the debtor can be transformed into a refusing of the debtor or the violation of the collateral obligation. The German legal system has protected the right of the creditor in a comprehensive way. In the contract law of the People’s Republic of China identifies the refusing of the debtor before the expiration of the contract as a typical case of anticipatory breach of contract, which must be distinguished with the unstable counter-argument. Eventually, this leads to the confusion of legal remedies of the creditor.According to relevant Chinese regulations, if the debtor has refused the performance before the expiration of the contract, the creditor can only claim anticipatory breach of contract and exercise the right of cancellation and right of action for the recovery of damages. The creditor can not refuse to complete his performance based on the right of the unstable counter-argument. The creditor has no right to require the explanation of the debtor, if he will obey the contract or not. As a conclusion, the Chinese contract law should complete the regulations to protect the rights of the debtor as the German law. It is also important to handle the relationship between the unstable counter-argument and anticipatory breach of contract. The expansion of the creditor’s legal remedies will eventually help to achieve the purpose of the contract and promote the transaction successfully.