On The Remedies For Defective Performance

Under the unitary system of contract breaching,as one of the factual forms of contract breach,the remedy of defective performance comes from the combination of warranty liability for defect and remedy for non-performance of debt.In the system of non-performance of debt,the theory of positive infringement of obligatory right put forward by Staub extracted the defective performance and injury performance from the original dichotomy of non-performance and delayed performance.Warranty liability for defect separated the performance of defects in certain contracts such as sales contract from the system of non-performance of debt.Therefore,first chapter reviews the theoretical evolution from positive infringement of obligatory right to inadpuate performance,the fate of positive infringement of obligatory right in the German law and the process of proposing the concept of defective performance in inadpuate performance.On the basis of clarifying the functional logic of the traditional warranty liabilities for defect,this article expounds the trend of warranty liabilities for defect from separation,interleaving to integration with non-performance of debt in the process of expanding its scope of application to categories,subsequent defects and contract of undertaking.The incomplete payment theory in Japan and Taiwan’s debt law came down in one continuous line with the theory of positive infringement of obligatory right established by Staub.However,the theory of positive infringement of obligatory right focuses more on the harm of debt violation to the inherent interests of creditors,that is,the injury performance,and its value is more reflected in the remedy for the defects of German tort law.In fact,the incomplete payment theory and its binary division structure in Japan and Taiwan are constructed with defective payment as the core,focusing on the damage to the creditor’s performance interests caused by debt violation,and dividing the incomplete payment into defective payment and injury payment according to whether the debt violation damages the inherent interests of creditor,and its value is more focused on the typing of debt nonperformance.In the simple commodity economy dominated by transaction of ascertained goods,the warranty liability for defect in the initial sense aims to rectify the imbalance of consideration caused by hidden initial flaw under the principle of "buyers watch for their own business",which is characterized by no-fault guarantee,price reduction and short-term limitation.With the expansion of the scope of application to the subsequent defects,the sale of unascertained goods and contract of undertaking,the characteristics of defect warranty liability based on the original logic,which is different from the non-performance of debt,gradually disappeared,and defect warranty liability was integrated by the latter from the separation and interleaving with the latter.The concept of injury performance originates from the German theory of positive infringement of obligatory right,which is the remedy for the damage of creditor’s inherent interests caused by debt violation.The concept of collateral obligation was put forward by scholars on the basis of analyzing the process of performance with the theory of positive infringement of obligatory right.The former reflects the extension of relief scope of debt violation,while the latter shows the extension of debtor’s obligation scope.The theory of positive infringement of creditor’s rights not only extends the collateral obligation of the original auxiliary performance obligation to the protection obligation independent of the performance obligation,but also extends the relief scope of the debt non performance system to the relief of the collateral obligation and the protection obligation on the basis of the violation of the performance obligation.The collateral obligation can be divided into the protection obligation to protect the inherent interests of the creditor and the collateral obligation to assist the creditor to fulfill the benefit of perform.The collateral obligations to assist the creditor to fulfill his benefit of perform can be classified as subordinate performance obligations which are not substantially different from them,and can be regarded as a supplement to the agreed performance obligations.Violation of such collateral obligations can also constitute defective performance.In the aspect of contract law,defective performance means that the performance of obligation violates the creditor’s performance interest and does not conform to the agreement.Under contract law of China,defective performance features three basic characteristics.Firstfly,the debtor has performed the payment obligation,which is an important difference between defective performance and "non-performance of contractual obligations".Defective performance can be the debtor’s timely performance,or it can coexist with the delay of performance.If the debtor’s defect of performance is not remedied at the end of the performance period,it is defective performance,and the remedy has been completed at the end of the performance period and successfully eliminated the defect without causing loss to the creditor,which does not constitute defective performance.Whether the debtor performs in advance,on time or delayed,the time of defective performance is defined as the later of actual performance time and due performance time.Secondly,the debtor’s performance does not conform to the contract.The judgment standard is the contract agreement,including the interpretation and filling of the contract agreement based on the legal arbitrariness,the principle of good faith and the supplementary explanation.Thirdly,the debtor does not have legal or contracted exemption.In civil law countries and regions,the imputation of non-performance of debt generally takes the fault principle as the basic principle,with the exception of no-fault principle under specific circumstances;while in common law countries,the imputation of breach of contract takes the strict principle as the basic principle,with the exception of fault principle under specific circumstances.The two models are seemingly opposite but actually interrelated.In these two models,the special provisions of the law or the agreement of the parties constitute the path from their respective basic principles to exceptions,so that the two models tend to be close,and the legal effect is almost the same.In CISG,PICC and PECL,the stipulation that the debtor should be liable for the breach of contract caused by common events can be regarded as strict liability.At the same time,these common documents of international contract law all stipulate the exemption reasons which are characterized by being unable to reasonably predict,avoid and overcome.The definition of exemption reasons is the key to its imputation principle,so it is also known as the "exemption principle" mode.The basic imputation principle of the liability for breach of contract in China’s contract law is the principle of strict liability,with the exception of the principle of fault liability under legal circumstances.At the same time,it provides for general exemption and some special exemption.The notice system of defect inspection in China’s contract law has the status of general law,rather than special rules only for specific types of contracts.Since the legal effect of the expiration of the period of notice of defects is to make the debtor’s performance flawless,the inspection notice can be regarded as the procedural condition of the composition of defective performance,and its core lies in the determination and application of the period of notice of defects.At the same time,inspection,as the pre-procedure and prerequisite of defect notice,plays a benchmark role in determining and applying the period of defect notice.In order to realize this benchmark function,the general standard of inspection behavior should be clarified.That is,"when the buyer receives the subject matter,he should inspect it in time according to the nature of the subject matter and the normal procedure",and distinguish the defect inspection period from the notice period.In the internal framework of the defects notification period rule,it is the general rule that the buyer should notify the seller within a reasonable period after discovering or should have discovered the defects;for the defects that can not be discovered after inspection but are discovered in the future,the buyer should notify the seller within two years at the latest after the delivery of the subject matter,and the two-year period rule is applicable in combination with the reasonable period rule;if the statutory or agreed quality guarantee period of the subject matter exceeds two years,the two-year period shall not apply,but the quality guarantee period shall apply.The buyer and the seller may agree on the defect notice period,but shall not agree to exclude or shorten the two-year period mentioned above.In China’s contract law,the warranty liability for defect does not constitute an independent or relatively independent system of performance obstacles,which has been integrated by the general relief system for breach of contract.Moreover,compared with the new German civil code,the integration in our law is more thorough.In China’s civil code,the meaning of the so-called warranty liability for defect and remedy for defective performance is actually the same.In other words,the defect warranty liability in China’s contract law is actually the embodiment of remedy for defective performance in specific types of contracts.However,in the sale of specific object,the inherent logic of the system of defect warranty liability balancing the interests of both parties can more effectively prove the rationality of the remedy for breach of contract applied to the original defects.In the case that the seller should have failed to inform the buyer of the original defects directly related to the subject matter or the price,the warranty liability for defect can provide more powerful and sufficient protection for the buyer than the system of Culpa in contrahendo.As temporary defenses,performance defense and refusal to accept can urge the defaulting debtor to continue to remedy performance in the case of defective performance,which are auxiliary measures to remedy the default of defective performance.In the case of the other party’s defective performance,the defense of non-performance of contract,as the auxiliary of the realization of breach of contract relief,directly corresponds to the way of breach of contract relief,and indirectly corresponds to the defective performance through breach of contract relief.According to the defective performance of the breaching party,the reasonable remedy chosen and sought by the aggrieved party is an important factor to determine whether it can claim the right of defense against non-performance of the contract.In judicial practice,the so-called "quantitative analysis and grasp" of the defense of non-performance of contract is usually only applicable to the defense of non-performance or partial non-performance,but not applied to the defense of defective performance.For defective performance,the exercise of the right of defense against non-performance of contract is to force the other party to bear the responsibility for breach of contract,which should be corresponding to the remedy for breach of contract chosen by the aggrieved party,but it is not appropriate to take the corresponding relationship with the simple quantity of defective performance as the exercise condition.Articles 525 and 526 of the civil code stipulate that the person who has the right to defense against non-performance of a contract has the right to "refuse" the other party’s "corresponding performance requirements".In essence,it is the restriction of the principle of good faith on the exercise of the right to defense against non-performance of a contract,especially the restriction on partial performance and defective performance,that is,the exercise of the right to defense against non-performance of a contract in such circumstances shall not violate the principle of good faith.Based on the principle of good faith,the severity of defective performance constitutes a restriction on the exercise of the right of defense against non-performance of the corresponding contract.For minor defective performance,the right of defense against non-performance of the contract should not be exercised,because as a specific requirement of the principle of good faith,the exercise of the right of defense against minor defects actually constitutes an abuse of rights.In contract law of our country,"acceptance" is used in various occasions.The conditions for the right to refuse to accept the defective performance include: firstly,the right to refuse to accept the defective performance should be applicable to the delivery of the subject matter,and after the completion of the delivery,it belongs to the jurisdiction of the right to continue to perform.Therefore,refusing to accept is not the creditor’s negation of the transformation from de facto acceptance to legal acceptance,but an obstacle to the completion of the debtor’s delivery.In fact,the order of time between factual acceptance and legal acceptance shows that refusal to accept and continuous performance can not be used together.After the completion of the delivery,the creditor claims to continue to perform for the debtor’s defective performance and other remedies for breach of contract,which indicates that the creditor refuses to accept the so-called "acceptance" in the legal sense,and the "refusal to accept" after the completion of the delivery also lacks the significance of independent existence.Secondly,if the acceptance will cause the loss of the creditor’s interests,we should not only consider the impact of the defects on the creditor’s performance interests,but also consider the impact of specific ways that may be taken to continue the performance after the acceptance on the realization of the creditor’s interests.The creditor should also be allowed to refuse to accept the measures if the implementation of the measures will harm the interests of the creditor.However,if the damage of defective performance to the interests of creditors is extremely slight,the right of refusal to perform should be excluded.Thirdly,based on the principle of freedom of contract,both parties make clear the conditions for the establishment of the right of refusal to accept by way of agreement,and can also set up other more stringent conditions for it.The exercise of the right of refusal to accept can prevent the completion of the debtor’s obligation of delivery,and will not lead to the delay of acceptance.On the occasion of the debtor’s defective performance,the creditor exercising the right of refusal can force the debtor to remedy its performance defects,especially the defects of the subject matter to be delivered.Compared with the situation where the creditor exercises the right of defense against contract non-performance,the refusal to accept can make the debtor face the double pressure of delayed performance and untransferred risk burden,so that the debtor has a stronger sense of urgency to carry out and complete such remedy.There is a general and special relationship between continuous performance and remedial performance.The preferential application rule and the exclusion of application situation of continued performance are also applicable to the remedial performance,and the remedial performance is more targeted to the remedy of defective performance.On the basis of drawing lessons from CISG,PECL and other international unified documents of contract law,and according to the liability law mode formed by its own legislative tradition,China’s contract law and civil code incorporate continuous performance into the liability system for breach of contract,and make it a form of liability that can be realized with the help of national coercive force.This does not contradict or conflict with our understanding of the effect of classifying the right of claim for continuous performance as a debt based on the concept of debt in German civil law,nor can it be a reason to deny this theoretical inheritance.Continuous performance can not only be used as the expression of the effect of creditor’s rights,but also become a form of liability or relief for breach of contract.As a remedy for breach of contract,continuous performance should be applied prior to damages and rescission.This kind of priority is the exclusion of other remedies in the application order,which limits the creditors(the aggrieved party)to choose the remedies.Although continuous performance should be applied first based on the principle of contract adherence,but its application can be excluded in certain circumstances.From the perspective of the creditor,when the claim for immediate damages or rescission of the contract is justified,or the debtor refuses to continue to perform,the creditor has the right to directly claim other forms of relief for breach of contract,and is no longer bound by the priority of continuous performance.From the perspective of the debtor,in the case of inability to perform or similar difficulty in performance,the debtor may refuse to continue to perform,thus eliminating the constraint of the priority application of continuous performance.The "excessively high" in clause 2,paragraph 1,article 580 of the Civil Code of China is not only the absolute amount,but also relative to the creditor’s performance interests is too high,and it should reach a serious degree.The performance benefit of the creditor,as the benchmark for comparison,should be determined by combining the contract agreement of the two parties,especially the contractual purpose of the creditor.The more dependent the realization of the performance benefit of the creditor is on the continuous performance,the higher the standard for determining the excessive performance cost of the debtor to get rid of the continuous performance.In addition,whether the debtor is at fault for the performance obstacle should also be taken into consideration in the determination of excessive performance cost.In fact,the debtor still has the objective possibility to continue to perform when it is not suitable for compulsory performance,the cost of performance is too high and the creditor does not claim performance within a reasonable period of time.If the debtor claims the right of defense and refuses to continue to perform,and the creditor does not terminate the contract,the debtor in the temporary contract can take the initiative to terminate his contractual obligations through the compensation for damages instead of performance.However,if the debtor fails to perform the non-monetary payment obligation in the continuing contract,and the first paragraph of Article 580 of the civil code excludes the continuous performance,he can only terminate the contractual relationship by means of the "right of termination of action" stipulated in second paragraph of Article580.Within the remedial performance,the aggrieved party of defective performance should follow the rule of reasonable choice in Article 582 of the civil code when choosing to eliminate the defect or reperformance.The breaching party can refuse the remedial performance chosen by the aggrieved party according to Article 580 of the civil code,paragraph 1 "in fact can not" or paragraph 2 "the cost is too high".When the two modes of remedial performance have the same remedial effect on the aggrieved party’s performance interest,the breaching party can reject the aggrieved party’s claim on the basis that the mode of remedial performance chosen by the aggrieved party is too expensive relative to the other mode of remedial performance.When there are differences in the remedial effect of the two modes of remedial performance on the performance interests of the aggrieved party,if the breaching party can not refuse the reperformance selected by the damaged way based on the high cost or impossibility of performance in fact,the aggrieved party has the right to choose other other modes of remedy for breach of contract other than remedial performance.Remedial performance and compensation for damages can be used together.Remedial performance and termination are heterogeneous in relief function.Generally,they should be in selective cocurrence relationship,and cannot be used together.On the premise that remedial performance has priority over other remedies for breach of contract,there is a limited aggregation relationship between remedial performance and other remedies for breach of contract,that is,the aggregation relationship on the premise of not violating the functional heterogeneity,rather than simply the selective concurrence relationship.Price reduction originated from the traditional defect warranty liability system of Roman law,which has a long history and is widely accepted by civil law countries and regions.It is also one of the important relief methods for breach of contract in China.However,price reduction is seldom applied in judicial practice,and its qualitative dispute is relatively large in academic circles.The function of price reduction system is to restore the balance of consideration in the original transaction by reducing the price,and resolve the unfairness of keeping on performance caused by defective payment.The function and realization logic of the reduction of price,which is integrated into the relief system for breach of duty,still maintain its distinct uniqueness.The price reduction in Chinese law is not a substitute for termination.In the case that the amount of reduction can only be determined by the consent of the other party or the court ruling,compared with the right of claim,the right of reduction set as the right of formation is not easier or more convenient to realize.Based on the idea of contract modification,it is more reasonable to set price reduction right as claim right.The key to the realization of price reduction function lies in its specific calculation standard,that is,the "proportional difference method" based on the price agreed in the contract,which can maintain a certain proportion of the consideration relationship between the transaction price and the market price that has been determined and reflected by both parties at the time of signing the contract,so that the price arrangement made by the parties in the contract can continue to be maintained based on the autonomy of private law.The calculation method of price reduction stipulated in the Interpretation of the Sales Contract Law deviates from the specific function of price reduction and should be changed to "proportional difference method".Although the price reduction changes the contract price,the purpose of it is to maintain and continue the consideration relationship established by the original agreement,so as to finally complete the performance of the contract.In the functional orientation,there is no fundamental difference between price reduction and remedial performance.The function of price reduction determines that the scope of relief is limited to the value loss of performance,so it is not secondary relief,and it is in the same level of choice relationship with remedial performance.In the relief of performance value loss,price reduction and compensation for damages are in a substitute relationship.In other cases,they are in a concurrent relationship.The expression of "return of goods" appears earlier and more frequently in China’s administrative rules and regulations,largely because the core meaning of "return of goods" refers to the concrete behavior of returning the subject matter,rather than the abstract contractual relationship,which is very convenient for identification,supervision and implementation,and meets the efficiency requirements of administrative management."Return of goods" has many meanings in Chinese law.It is a practical but illogical legal concept.In the early legislation of our country,even the drafting of law was often strongly participated in or even led by the relevant administrative departments.Extended from "Economic Contract Law","Regulations on Undertaking Contract","Regulations on the Purchase and Sale of Industrial and Mineral Products" to Article 111 of "Contract Law" and article 582 of "Civil Code",to a certain extent,the concept of "return of goods" should be the implication and continuation of administrative expression in China’s civil law.The core meaning of return is the act of returning the subject matter,which has no independent and clear legal effect when it is not associated with a specific expression of intention.In the case of defective performance,due to the decision not to accept the other party’s continuous performance,the aggrieved party’s claim of return in the final sense is usually not limited to the return of the subject matter,and will certainly require the settlement of the contractual relationship between the two parties at the same time.Otherwise,it will inevitably fall into the disadvantage of "the goods have been returned but the money has not been returned".However,the settlement of the contractual relationship between the two parties does not necessarily take the termination of the contract as the premise,because the compensation for damages by substituting performance without termination of the contract can also clear the contractual relationship between the two parties.In the defective performance,if the breaching party fails to repair,replace or redo within a reasonable period as required by the aggrieved party,the aggrieved party may claim damages in lieu of performance and return the accepted subject matter,except for minor performance defects.Meanwhile,the aggrieved party shall perform its obligation of payment as agreed in the contract between the parties.If such obligation is a monetary obligation,it may be set off against the corresponding part of the damage compensation of the breaching party.The so-called "the purpose of the contract can not be achieved" is the key premise of legal relief in the case of defective performance.Only when it constitutes the substantial content of the performance interest can it be included in the scope of contract purpose.If it has no substantial influence on the content of the creditor’s performance interest,even if the purpose is stipulated in the contract,it does not constitute the content of the purpose of the contract.The definition of "contract purpose" in the system of legal rescission right of breach of contract is the performance interest of the aggrieved party based on the contract agreement,which is in line with the legislative intent of the relevant provisions in the contract law and civil code,as well as the common understanding of judicial practice and academic theory.It can be further clarified through the correct contract interpretation with the aid of a typical contract payment obligations on the parties typed results.In the judgment of whether the defective performance leads to "the purpose of the contract cannot be achieved",the factors include: firstly,the defective performance usually violates the principal payment obligation,that is,the default party has defects in the performance of its agreed main performance obligation;secondly,the defective performance causes serious damage to the other party’s performance interests;thirdly,whether the default party can remedy the defects within a reasonable period of time.In the termination of a continuous contract,more attention should be paid to the loss of the trust relationship between the parties,and the result that the parties cannot be expected to continue to maintain the contractual relationship.However,the fundamental breach of the contract or the failure to achieve the purpose of the contract,as the essential elements of the general legal termination right,obviously cannot cover such considerations.In the continuous contract,especially in the continuous supply contract,although the defective performance may not constitute a fundamental breach of contract,the opposite party should be allowed to terminate the contract for major reasons when the defective performance occurs many times so that the opposite party loses the trust of long-term performance.In the continuous contract,to judge whether the defective performance constitutes a major cause for the termination of the contract,so that the other party loses the trust and is difficult to maintain the continuous performance,we need to consider the following factors: firstly,the severity of the performance defects,although it does not need to achieve the degree that leads to the failure of the other party’s contract purpose or the fundamental damage to its performance interests,should not be significant slight.Secondly,whether there is a situation that there is no effect after the time limit of remedy or bing urged.The third factor is the frequency of defective performance of the breaching party,including the frequency and time interval of defective performance.If the more times and the shorter time interval of defective performance of the breaching party,the greater the damage to the performance interests and trust relationship of the aggrieved party,and its behavior tends to constitute a major cause of breach.The fourth factor is the length of the remaining period of validity of the continuous contract.In the case of rescission of instantaneous contract breach,especially rescission due to defective performance,the meaning of "restitution" is clearly defined to restore the interest relationship of both parties to the state without any performance,which is in line with the purpose of the parties to terminate the contract and the function of the contract termination system.In the effect of contract termination in China,the "restitution" of the fulfilled part should be interpreted in the broad sense,that is,it includes the return of movable property,real estate and other physical forms,as well as the compensation of value forms such as money,labor or disappeared property,rather than the return of original things in the physical form only.On the basis of a broad interpretation of "restitution" in the second half of Article 566,paragraph 1 of the Civil Code(Article 97 of the Contract Law),and defining it as the partial effect of the performance of the temporary contract that is terminated,"taking other remedial measures" can be interpreted as the regulation of the part that has been performed before the termination of the continuous contract.To performed part of the termination of the continuous contract,if there is defect in performance or the imbalance of the consideration paid by both parties,the parties can request to take remedial measures.In this sense,in the termination of continuous contract,especially the termination of defective performance,for the performed part,the remedies for breach of contract such as continuous performance,remedial performance and price reduction can be applied together with the rescission of contract.As for the scope of damages after the termination of the contract,it is generally believed that the loss of performance interest should be the main one,and the loss of inherent interest and trust interest can also be included on the premise of no repeated filling,so as to make up for the lack of protection of "restitution" for the right to terminate.Breach of contract,especially in the case of defective performance leading to the termination of the contract,the unperformed part is exempted from performance.If the rescinded contract is a continuous contract,the party with the right of termination can claim the breaching party to compensate for the damage of his reliance interest.If the rescinded contract is a temporary contract,due to the indivisibility of the content of rescission of temporary contract,the person who has the right to rescind may claim damages for the interests of performance or reliance on the part that has been performed,and has no right to claim damages for the interests of reliance on the part that has not been performed.