The Right To Reduce Prices In Defective Performance Of Sales Contract

When the sales goods is defective,the Article 111 of the Contract Law gives the buyer the right to reduce the price or remuneration(hereinafter referred to as “price reduction”),but this article does not specify the definition,application and calculation of the reduction.Although the judicial interpretation standardizedthe calculation of the price reduction,however,because of the big differences between the regulation and the theory,the regulation has aroused more extensive attention and discussion in academic circles.Besidesthe lack of legislative norms,the price-reduction system is inaccurate in China's judicial practice,and its application is also disordered.This paper takes the right of reducing the price in defective performance as the research object,based on the problems existing in the specific application of the price reduction system in the judicial practice of our country.And the purpose of the paper is to clarify the nature of the right of pricereduction,grasp the relationship between the price reduction and compensation for damage,and assimilate the specific application of price reduction.As to the nature of price reduction,there are two kinds of theories in our academic circles: "the right of claim" and "the right of formation ".Combined with the purpose of the price reduction system and the background of comparative law,thenature of price reduction in China is a right of formation,which is essentially a right to unilaterally alter the contract.In regard to the relationship between the price reduction and the damages,first of all,there is an essential difference between the price reduction and the damages in the institutional idea,so the price reduction system has the particularity that cannot be replaced by damages.In addition,they are very differentin the scope of application,the procedures of application and calculation.As for the calculation of price reduction,there are two kinds of methods in theory: "proportional method" and "margin method".The purpose of price reduction system which is to maintain the equilibrium of the contract determines the standard of the reduction should be "proportional method",and the "time of delivery" shall be used as the time standard for calculating the reduction amount.Secondly,with respect to the specific application of price reduction and damages,In China,due to the price reduction is a relief for breach of contract,so there is no priority applicability compared with damages.Buyer who claims for defective reliefcan choose a more applicable method to protect his relief.Finally,whether the buyer can continue to claim damages after the price reduction is controversial.Under the view of contract revision,the type of damages should be analyzed,for example,damages to inherent interests shall be permitted,and except thatbuyer has no basis for claiming damages based on the new contract which taken place the old contract after the reduction.The main concern of the conditions for the exercise of price reduction lies in the determination of "the quality fails to meet the agreed requirements" and argument on the priority of the debtor's right to cure.The definition of "quality" in " the quality fails to meet the agreed requirements" should be expanded purposefully and interpreted as all the criteria that could be agreed upon by the parties.With regard to the priority of the debtor's right to cure,it is suitable to be positive about this,which not only conforms to the legal requirements and the original intention of Contract Law of China,but also is conducive to ensure the integrity of the price-reduction right system.With regard to the procedural structure of the price reduction,the court and the arbitral tribunal shouldn't be affirmed as legal subjects who have the right to apply the price reduction on their own.In terms of usage,as a right of formation,price reduction can be exercised by a unilateral declaration of the intent by the damaged party.Finally,the legal effects of the reduction are mainly reflected bythe calculation of the reduction amount,the establishment of a new contract,the returns of the paid cost and the exclusion of other forms of relief.