Research On The Retaking System Of The Conditional Sale

This Article tries to analyze the essence of the retaking right of the seller in conditional sale in China Law. Based on the essence of the retaking right, this article focuses on the internal application of the retaking right as well as its external potency.There are four theories about the essence of the retaking right of the seller in conditional sale. The first one regards the exercise of the retaking right as the consequence of the exercise of the right of cancellation. The typical instances of legislation are German Civil Code and Draft Common Frame of Reference in Europe. The law tries to protect the interest of the buyer but there is a fierce controversy about it. In practice, the court in Germany recognizes that, the buyer can execute the object based on the price credit. The second one denies that the contract ends with the retaking right. But after the redemption period, if the buyer doesn’t pay the price, the contract will end. The compulsory resale obligation of the seller is just a means to confirm the amount of compensation for damages. The third one recognizes that the contract still exists after the exercise of retaking right. And the consequence of the retaking right is just the recovery of defense right of simultaneous performance. The typical example is the traditional German theory before the reform of the law of obligation, which values the realization of the credit of the seller. In the fourth one’s opinion, the retaking system is similar to the execution proceeding. So the retaking right plays a role as the distrain in the execution proceeding. The typical instance of legislation is Uniform Conditional Sales Act in America and the law in Taiwan of China. Now the fourth one is accepted by the majority in academic and practical circles in China.The second chapter aims to determine the essence of the retaking right of the seller in Chinese law with the analysis of the retaking system in detail, which sets the base of the research on the internal application of the retaking right as well as its external potency.For the interest of the seller, the retaking system in China has been combined with the resale system, which accords the seller priority to realize his credit. So the retaking right in China acts as the distrain in the execution proceeding with the consequence to give the seller priority to realize his credit.To balance the interest of the buyer, there is a redemption system in China. Within the redemption time limit, the buyer can take back the object if he pays the due money. And the sales contract recovers to the condition before the seller retakes the object. So in the substantial law, the retaking right acts as the cancel of the prior obligation of the seller, which leads to the recovery of defense right of simultaneous performance.The seller performs the prior obligation only under the condition that the buyer pays the due money in time. Without this condition, the seller has the right to cancel his prior obligation and to retake the object. In the bilateral contract, the defense right of simultaneous performance itself acts as the guarantee to realize the credit.Although the debtor can also cancel the distrain in the execution proceeding, but the essence of the retaking right in the execution proceeding can not cover the essence of the retaking right in the substantial law. The principles behind are entirely distinct. In the execution proceeding, the debt ends since the debtor pays off the debt. But in the substantial law, the contract just recovers to the condition before retaking instead of going to end. The rest of the money still needs to be paid the way agreed in the contract. So the debtor must pay all the rest of the money to cancel the distrain in the execution, while the buyer in the conditional sale can take the object back after paying the due money.Furthermore, with the consideration of the responsibility system for breach of contract in China, the relationship between the retaking right and the right of cancellation can be understood better. Firstly, the retaking right is not based on the right of cancellation. Secondly, these two rights are both the parallel legal remedies for the seller. The seller can choose each one of his own free will. Lastly, the seller can also terminate the contract after he retakes the object.With the recognition that the retaking right acts as the cancel of the prior obligation of the seller, which leads to the recovery of defense right of simultaneous performance, the internal application of the retaking right can be better achieved.Firstly, the regulation that the seller can not retake the object if the buyer pays 75% of the total price in China, must be applied limited. Because it restricts the retaking right, the best way to realize the credit. Secondly, the establishment of the legal redemption period is necessary to protect the interest of the buyer. Thirdly, concerned of the interest of the buyer, the resale right of the seller must be also recognized as the obligation of the seller.The essence of the retaking right,as the distrain in the execution proceeding with the consequence to give the seller priority to realize his credit, influences its external potency strongly.The conditional sale contract should be made in written agreement to make the legal relation clear. And the registration system with the counter potency should be set up to protect the third one’s interest. With the consideration of the efficiency and the privacy protection, the content of the registration can be simplified. The financing statement and the request system from America Uniform Commercial Code deserve to be used for reference.The counter potency of the registration means that, the seller can not exercise the retaking right from the third party acting in good faith. But the third party is limited only to the one who has the right on the object, not including the other creditor of the buyer. The credit of the seller deserves preferential treatment, so the counter potency of the registration may have the retrospective effect in certain conditions.To protect the labor and expense of the repairman for the object, the law accords the repairman the lien, the legal priority to realize his credit. So it has nothing to do with the bona fide acquisition and it is not necessary that the repairman is in good faith or not. Within the limit of the increasing value, the repairman has the priority to realize his credit anterior to the seller. This is the exception of the counter potency of the registration.If the buyer sell the object to the third party, which acts in good faith and meets the other conditions of the bona fide acquisition, the third party will achieve the ownership of the object. The seller of the conditional sale will be deprived of the ownership as well as the retaking right. Since the registration system of the conditional sale has not been set up in China up to now, the good faith of the third party should be judged with the transaction practices. After the introduction of the registration system of conditional sale, the fact of registration itself eliminates the good faith of the third party in principle. But the transaction practices should still be taken into consideration.If the seller uses the object as guarantee for the loan, the third party in good faith may acquire the guarantee. But the seller will not be deprived of the retaking right for this reason. The third party just has the priority to realize his credit anterior to the seller. To promote loan transaction, the third party without good faith can have the guarantee, as long as the interest of the seller is not impaired.