Study On The System Of The Defaulting Party Applying For Contract Termination

In the "Xinyu Company v.Feng Yumei Retail Sales Contract Dispute Case" published in the 6th issue of the Supreme People’s Court Bulletin in 2006,the court ruled in favor of the breaching party Xinyu Company’s claim to terminate the contract.However,based on the theoretical basis of maintaining strict principles of contract,giving play to the relief function of the contract cancellation system,and reducing moral hazard,and avoiding the breaching party’s behavior of making profit by contract cancellation,the traditional theory of contract law does not support the breaching party as the subject of voluntary termination of the contract.Legislatively,Article 353,paragraph 3 of the "Second Review Draft of the Contract Draft of the Civil Code"(hereinafter referred to as the "Second Review Draft of the Contract")published by the "China People’s Congress" on September 5,2018 responds to the need for disputes between judicial practice and theory.This paragraph stipulates the legal rules for the breaching party’s application for termination of the contract.However,in the "Civil Code Draft" published on December 16,2019,this provision is deleted.Both the first and second drafts of the Civil Code’s contract part stipulated the rules for the breaching party’s application for termination of the contract,but they were deleted in the final draft,indicating that the legislator still hesitated on whether the defaulting party could voluntarily terminate the contract’s value select.The purpose of this article is to discuss whether the contract part of the Civil Code needs to stipulate that the breaching party should apply for the cancellation system and how to set up specific legal rules if the Civil Code stipulates;if not,how should the judicial practice deal with such problems.From the perspective of empirical research,following the aforementioned communique cases,on the one hand,many judicial cases have appeared in the judicial practice supporting the breach of contract from the breaching party.However,the current law lacks specific provisions for breach of contract by the breaching party,resulting in the difficulties for courts and arbitration institutions to explain the accordance when the breaching party terminates the contract.On the other hand,due to the lack of clear legal rules and ambiguous provisions of the current law on the subject of the exercise of the statutory right of cancellation,the judgment results of supporting the breaching party’s cancellation of the contract andresolutely denying the breaching party’s termination of the contract are opposite but also coexisting,resulting in different cases that the judicial injustices have been sentenced and undermining the authority of the law.The decision to support the breaching party’s termination of the contract brings a good social effect and causes a positive impact on maintaining fairness and justice as well as balancing the interests of the parties.However,through the interpretation of the meaning,purpose,system,and history of China’s "Contract Law" and the provisions on the right to terminate the contract in judicial interpretation,we can see that the subject of the termination of the contract specified in Article 94 of the Contract Law does not include the breaching party(Except for force majeure situations and reference clauses);Article 110 of the Contract Law can only be used as a defense rule for the breaching party to fulfill the right of request by the breaching party,when performance cannot be performed;Change of situation in Article 26 of the Judicial Interpretation of Contract Law(2)does not cover the situation in which the breaching party applies for termination of contract.Therefore,the provisions of the current law on the statutory right to terminate the contract do not solve the actual problem of the breaching party applying for termination of the contract.Meanwhile,the concept of the Anglo-American contract law--the theory of efficiency breach that supports breaching party terminates the contract is also inapplicable in our country.In view of the lag of legislation and the need to standardize the results of judicial decisions in similar cases,at present,it is imperative to stipulates the system for breaching party’s application for the termination of the contract.Judgment experience in judicial practice provides a breakthrough for us to discuss the relevant theories of breach of contract by the breaching party.Based on the analysis of the legal nature of the contract cancellation right in China,it cannot affect the performance of the contract through force majeure,change of circumstances,commercial risks and subjective reasons of the parties.The strength of the force is different,so the effectiveness of the right to cancel the contract is also different.It can be concluded that the breaching party can only form the right to sue to cancel the contract.At the same time,referring to Japan ’s latest civil law amendments(credits)in 2017 on the cancellation of contracts,changes in the legal rules for contract cancellation rights under circumstances where performance cannot be performed reducing the moral difficulty of the debtor ’s breach of contract,highlighting that the contract cancellation system does not punish breach of contract purposely,which provides reasonable theoretical support for our discussion to give the defaulting party the right to terminate thecontract voluntarily.At the same time,Japan ’s new debt law has narrowed the scope of application of creditors ’demand for cancellation,highlighting the concept of the main debt of the contract,which is specifically reflected in the fact that Japanese lawmakers believe that the internal requirements of contract cancellation are“ inadequate contract purpose ”and“ serious violation ”.The intention provides a powerful legislative and theoretical reference for us to discuss one of the physical requirements of the breaching party’s application for the termination of the contract "making the contract unrealizable".When the legal interpretation cannot cover the specific issue of the breach of contract of the breaching party,it is necessary to create new rules.Combining with the provisions of the Second Review Draft of the Contract,in view of the moral flaws in the breach and in order to limit the abuse of rights by the breaching party,strict entity and procedural requirements should be set for the breaching party ’s application for the termination of the contract system.Entity requirements specifically include: failure to perform or excessive performance costs that render the contract purpose unrealistic;breaching party unintentional;breach of contract by the breaching party constitutes abuse of rights and apparent injustice;must be limited to the performance of non-monetary debt;full compensation for the breaching party;the expected loss of interest is to achieve a balance of interests between the parties;the essentials of the procedure are that the breaching party must terminate the contract through litigation or arbitration.Factors such as the extent of the rights and the distribution of the rights and obligations of the parties,it is determined whether the contract is terminated.In the context of the lack of existing laws and the inconsistency of theoretical theory,the reality of judicial practice determines that the civil code contract editor should make provisions for the breaching party’s application for cancellation of the contract system,and standardize the judgment results of the breaching party’s application for cancellation of the contract and safeguard the legitimate rights and interests of the parties.In the specific setting of the rules,through the control of the entity requirements and the procedure requirements,the breaching party ’s application for the cancellation of the contract system can be made reasonable,feasible and normative.