On The Exercise Of The Right To Terminate The Contract Of The Defaulting Party

In the era of market economy,the exercise and performance of rights and obligations by both parties in the contract can create economic value for the society.China's "Contract Law" strictly adheres to the spirit of strict contract,but based on the need of the free will of both parties,it also gives the parties the right to terminate the contract.The right to terminate a contract refers to the right to form a contract for the termination of the contract when the statutory or agreed conditions are fulfilled.The right of rescission gives the contracting parties a new way to break free from the shackles of bad contracts and actively participate in the next market transaction,thereby improving transaction efficiency and protecting the legitimate rights and interests of both parties.Most scholars in China believe that if the parties are entitled to the right to terminate the contract under statutory or agreed conditions,the defaulting party should assume the liability for breach of contract and not the right to terminate the contract.This can be clarified through narrow interpretation in Article 94 of the Contract Law.However,the subjective and objective conditions of the parties in the process of performing the contract are constantly changing.If the observant party does not exercise the right of rescission,the breach of the party's performance of the contractual obligations will result in excessive performance costs,damage to the established third party's interests,and even Conducive to the consequences of transaction fairness and efficiency value.Then it violates the original intention of the contract law to create the right to cancel the contract.The current contract law does not clarify that the defaulting party also enjoys the right to terminate the contract.It is represented by the Supreme Court's case in the Supreme People's Court Gazette(No.6 of 2006),the Xinyu Company v.Feng Yumei's retail contract dispute,including the following In the McDonald's and Anliang company cases,the first-instance and second-instance courts gave the breaching party the right to cancel the contract.Such cases show that the defaulting party has certain legitimacy in the specific circumstances.However,there are still practical problems.The courts try similar cases in judicial practice,often through legal principles to fill in the loopholes,and there is no clear legal basis,which leads to different judgments in different places.In this case,it is easy to lead to unfair cases.In order to balance the issue of value conflicts,countries represented by the United States,France,and Germany have chosen to use efficiency default theory as a defaulter and enjoy the theoretical basis of contract cancellation rights.According to Posner's explanation of efficiency default theory:defaulters often do not deliberately default,they just think that they can't fulfill their contractual obligations at the usual cost.If the defaulting party weighs the negative benefits brought about by the default and continues to perform the actual costs brought about by the agreed obligations,it will be considered from the perspective of the general rational person and cannot be performed at a reasonable cost,for the sake of proper protection of the defaulting party.The defaulting party shall be given the right to conditionally terminate the contract.This article mainly elaborates on the topic through the following contents.The first part,through the typical case and related trial content,raises the relevant issues involved in the focus of the dispute.The second part elaborates the existing legal system and related problems in China from the scope of application of the right to terminate the contract,the subject of exercise,the mode of exercise,and the period of exercise.The third part,combining the research on the efficiency default theory between the civil law system and the Anglo-American law system,demonstrates that the efficiency breach theory should be the theoretical basis of the contractual rescission right of the defaulting party.The fourth part comprehensively enumerates the justification basis of the contractual right of the breaching party.The feasibility of the breach of contract by the defaulting party is achieved through the conditions provided by the current law and by weighing the conflicts between the various principles.The fifth part sets the limits on the exercise of the contractual right of the defaulting party.The defaulting party is still a person who violates the contractual agreement and cannot enjoy the right to terminate the contract without restriction.Otherwise,it will undermine the system of breach of contract liability and violate the principle of good faith,which is not conducive to the relief of the observant party.Therefore,this part sets the conditions for the dismissal of the defaulting party.Regardless of whether it is in practice or in theory,the right to terminate the contract by the defaulting party is in line with the legislative intent to create the right to terminate the contract law.It comprehensively reflects the basic values of the law,such as freedom,equality,integrity,and efficiency.What we should consider is whether these values give the defaulting party the right to conflict,and whether there are conflicts and how to resolve the existing conflicts.The correct method of dispute resolution can not only protect the interests of the observant party,but also appropriately protect the interests of the defaulting party.Thereby reducing the waste of social resources and promoting better allocation of resources,and ultimately achieving a dynamic balance of market transactions.