Study On The Issues Of The Defaulter's Statutory Right Of Rescission

In China,the statutory right of rescission is stipulated in Article 94 of the Contract Law,but this article is relatively vague about the subject of exercising the statutory right of rescission,namely "parties",which has caused different viewpoints on whether the defaulter has the right to rescind the contract.The mainstream view is that in case of breach of contract,only the observant party is entitled to rescind the contract,while in judicial practice,there are cases where the court supports the defaulter to rescind the contract and explicitly affirms that the defaulter has the right of rescission,although the applicable legal basis and demonstration ideas are quite different.In addition,some scholars use jurisprudence to explain why the defaulter has the right of rescission,or the necessity and legitimacy of granting the defaulter the right of rescission.Guided by the conclusions drawn from case analysis,this paper attempts to demonstrate from two perspectives of China's current legal provisions and jurisprudence that the defaulter has no right to rescind the contract,and no right of rescission shall be granted to the defaulter by legislation.Instead,it is suggested to solve the problem of contract deadlock where the purpose of the contract cannot be achieved,or unconscionability occurs and social resources are wasted,by issuance of judicial interpretation or guiding cases by the Supreme People's Court.The specific contents are arranged as follows:Chapter 1 is the introduction and definition of the thesis topic.Firstly,it analyzes the cases involving the defaulter's rescission of the contract in recent years,and sorts out the current judicial practice's attitude towards the defaulter's rescission of the contract from 118 judgments,as well as the basis and reasons for supporting or opposing the defaulter's right of rescission.Then,it clarifies the cope of the defaulter's right of rescission discussed thereof,which excludes rescission by negotiation,rescission as agreed in the contract discretionary rescission,force majeure and rebus sic sicutibus,and refers to where unforeseeable commercial risk occurs,the defaulter takes the initiative to breach the contract and requests rescission due to subjective factors.From the above,some problems that need to be solved urgently here are extracted: whether the defaulter has the right of rescission;if so,what is the legal basis and whether the basis is valid.Chapter 2 illustrates that any legal provision of China in force does not provide the defaulter the right of rescission,which is the falsification to the defaulters' right of rescission.It mainly analyses the articles of current law summarized from cases,to demonstrate that Article 94 and Article 110 of the Contract Law,Article 24 of the Interpretation II of the Supreme People's Court of Several Issues concerning the Application of the Contract Law and other relevant laws and regulations provide no authority on the defaulter's right of rescission.First of all,the nature of the statutory rescission right stipulated in Article 94 of the Contract Law is purely a right of formation.According to the general logical reasoning from the core value of the Contract Law,the statutory rescission right in Item 2 to Item 5 of this article can only belong to the non-defaulting party.Secondly,the essence of Article 110 is a defensive right of defense to deny the creditor's right to continue performance under certain exceptional circumstances,which cannot cause the defaulter to directly rescind the contract.Other relevant judicial interpretations or contents of the judicial documents do not fall within the scope of this thesis or eventually return to the interpretation to Article 94.Therefore,the defaulter has no statutory right of rescission based on the provisions of the current law of China.Chapter 3 is the jurisprudential criticism on affirming the defaulter's right of rescission,which is also the falsification.Firstly,the ground of "prohibition of abuse of rights" is not feasible,because it does belong to abuse of rights when non-defaulting party does not rescind the contract.The right can be exercised or waived,which is different from the obligation.The exercise and non-exercise of the right of rescission are two opposing concepts,which cannot be protected by law at the same time.Taking non-exercise of rights as abuse of rights will lead to over-interpretation of the principle of abuse of rights.Secondly,about the refutation to the legal value empowerment--it is true that the subject of the contract enjoys equality,but the value of justice is higher than equality.There is no absolute freedom in the world.The defaulter's freedom of rescission does not always exist,that means the defaulter gives up the freedom once deciding to breach.The efficiency principle in the Contract Law shall emphasize more on the efficiency of the whole society,while transaction safety is the maximum efficiency to ensure the circulation of the market.“Theory of Efficient Breach” should be denied,because it is unethical and inefficient,and more importantly,the theory is not recognized,but only proposed by legal economists of common law system and rarely applied in their judicial practices.Finally,it analyzes the deficiency of the balance of interests theory.On the one hand,the failure of the contract purpose or the impossibility of continuing performance will not lead to the unequal contractual rights of the parties,because the Contract Law stipulates the time limit for the non-defaulting party to exercise the right of rescission.On the other hand,granting the defaulter the right to rescind the contract cannot achieve the so-called balance of interests.The disputes will ultimately be dissolved depending on compensation for damages under which the defaulter's interests can also be protected by using derogation rules,etc.Therefore,each legal basis for affirming the defaulter's right of rescission is rebuttable.Chapter 4 discusses the opposition to legislation of the defaulter's right of rescission.The first section describes no concept of the defaulter's right of rescissioncan be found in most civil law countries and regions as well as international convention from the perspective of comparative law analysis The second section is to explain the lack of necessity and rationality of providing the defaulter with the right to rescind the contract,because there are few cases falling in contract deadlock of unconscionability resulted by the failure of realizing the contractual purpose,and it is unnecessary to regulate it by legislation.If it is regulated in the form of legislation,it will lead to excessive interference of the judiciary in the autonomy of the parties and waste judicial resources.Even if a contract deadlock which is similar to that of the case “Xinyu Company v.FengYumei” occurs,it will be inappropriate to adopt the solution in the Civil Code(Contract Compilation)(second draft).Instead,it should be handled by the court case by case,and it will be more reasonable and appropriate to dissolve by judicial interpretation or guiding cases.The last chapter is epilogue,which briefly summarizes the core issues and viewpoints mentioned above and put forward corresponding conclusions.