The Study On The Issue Of Termination Right Of Installment Contract In The Equity Transfer

Judicial trials must take facts as the basis and the law as the criterion,and a fair result usually comes from rigorous logical reasoning using syllogism.On September 19,2016,Guiding Case No.67-Tang Changlong Sues Zhou Shihai for Equity Transfer Dispute issued by the Supreme Court established an important referee rule,that is,the regulation on termination of contract in hire purchase of Article 167 of the Contract Law does not apply to the stock right transfer agreement of hire purchase of limited liability corporations.However,the referee rule is neither in line with the reasoning logic of the judgement documents of different levels in this case,nor in accord with the juridical reason and result of similar cases in current juridical practices.Meanwhile,it challenges the provisions of Articles 124 and Article 174 of the Contract Law.Therefore,its rationality needs further discussion.If the referee rule is reasonable,the there is an obvious flaw in the current law,which cannot provide a legal basis for the application of the right to terminate installment equity transfer agreement.If it is unreasonable,Article 167 of the Contract Law shall still be applicable to equity transfer in installment payment,and it is thus necessary to re-evaluate the referee reason of Guiding Case No.67.The core of the problem is whether the equity transfer of a limited liability company is so special that the general regulations of the Contract Law is not applicable to it.This paper aims to analyze the case using different methods to clarify whether the referee rule established by the Supreme Court are reasonable.The first part reveals the conflicts and confusions in the current legal logic.The reasoning logic of the judgement documents of different levels and the Key Points of the Judgement in Guiding Case No.67 are sorted out and analyzed to demonstrate that the Key Points of the Judgement is deviated from the facts of the case.The referee rule that the provision of Article 167of the Contract Law does not apply to the equity transfer of limited liability company actually presents conflicts and confusions in the legal reasoning logic.The second part explains that conflict exists between the referee rule set in the Guiding Case and the current judicial judgement.Relevant cases of the purchase with payment by installment are discussed,and the focus lays on the identification of the characteristics of hire purchase and the application scope of Article 167 of the Contract Law in judicial practice,as well as the applicability of provisions on hire purchase contract termination in equity transfer agreement.Quantitative analysis of the judicial judgment of the case is also conducted to display the conflict between the referee rule set in the Guiding Case and the current judicial judgement.The third part summarizes and reflects on the applicable rules of the installment purchase and sale set in the Contract Law and its judicial interpretation,and points out the contradiction between the deserved value and the actual value in the installment purchase and sale system in China according to the purpose of the first term of Article 167 of the Contract Law,extraterritorial legislation cases and the interpretation of statute.Therefore,Guiding Case No.67 issued by the Supreme Court restricts the application of the first term of Article 167 of the Contract Law by shifting from protecting the seller to protecting the buyer,which actually violates the statute and cannot achieve the purpose of protecting the buyer.The fourth part studies the defects of China's installment payment system,provides suggestions on the applicable rules of hire purchase and the referee ideas to apply these rules to equity transfer.First of all,the essential characteristics of installment purchase and sale,which means payment in advance or by installment,shall be clarified through legislation.Then,the connection between the first term of Article 167,the third and fourth terms of Article 94 of the Contract Law shall be fixed through system interpretation method to determine the conditions for exercising the right to cancel installment purchase and sale.Finally,since equity has a different nature from the subject matter of the sale and purchase contract,special consideration is required for the right to terminate the installment equity transfer agreement.The fifth part is the conclusion to the paper.