Bankruptcy Liquidation Rules About The Contract Of Sale With Retention Of Ownership

With the continuous downturn of the economic situation,the replacement speed of new and old enterprises is fast in today's society.How to solve the problem of bankruptcy liquidation fairly and efficiently of those declining enterprises is very important,not only for stimulating market vitality,but also for optimizing the business environment.According to the author's research,if the contract of sale with retention of ownership is involved in the bankruptcy procedure,what kind of liquidation rules should be adopted for the contract? Based on the unclear provisions between the bankruptcy law and the relevant judicial interpretation,many disputes have arisen in the academic and practical circles.Therefore,this paper focuses on the contract of sale with retention of ownership that has not performed well,and studies the liquidation rules of the contract in bankruptcy proceedings.As far as the contract of sale with retention of ownership is concerned,it will involve disputes of its nature,restrictions on the seller's right of withdrawal,protection of the buyer's right of expectation,weak publicity and other issues.In the process of bankruptcy liquidation,a key step is to pay off the specific claims of many creditors after ranking.If the contract of sale with retention of ownership is placed in the situation of bankruptcy liquidation,it will involve the problem of balancing the interests of the bankruptcy consortium represented by the bankruptcy administrator and the interests of the opposite party in the contract of sale with retention of ownership.This paper distinguishes the situation between the bankruptcy of the seller and the bankruptcy of the buyer in structure,and discusses the bankruptcy liquidation rules of the contract of sale with retention of ownership to be performed.When the party of the seller goes bankrupt,the seller's administrator has the right to terminate or continue to perform such sales contract with the provision that "the seller retains the ownership of the subject matter before the completion of payment".The buyer has the expectation of acquiring the ownership of the subject matter.At this time,when the seller's administrator exercises the option of "continuing to perform" or "terminating the contract",it should follow the principle of maximizing the value of the bankruptcy consortium,the principle of integrity and the principle of timeliness.If the seller's administrator chooses to continue to perform the contract,but the buyer fails to fully perform its contractual obligations in accordance with the contract,such as paying the price on time,or makes improper punishment to the subject matter of the sale in violation of the contract,such as transferring or pledging the subject matter,which causes damage to the seller,as long as the price paid by the buyer is greater than or equal to 75% of the price of the subject matter,the seller shall not take back the subject matter on the ground that it enjoys the ownership of the subject matter,so as to protect the buyer's expectant right to obtain the ownership of the subject matter.If the seller's administrator decides to terminate the contract,the "Compromise Theory" shall be adopted for the effectiveness of the contract after it is terminated,no matter the liability for returning the original payment due to the termination of the contract or the liability for damages except for the original payment,it shall be paid off as ordinary debt,so as to preferably balance the rights and interests of all parties.If we want to protect the buyer's expectant right to get the subject matter,we can learn from the provisions of the Germany Insolvent Law and adopt the path of "restricting the seller's administrator to exercise the right to terminate the performance of the contract that has not performed well",instead of adopting the way of paying off the debts arising from the rescission of the contract with the debt of common interest.When the party of the buyer goes bankrupt,the buyer's administrator may exercise the option of continuing to perform the contract and obtain the ownership of the subject matter by paying the whole price of the subject matter;it may also choose to terminate the contract.No matter what choice is made,the buyer's administrator should follow the principle of maximizing the value of the bankrupt consortium.While the seller's priority is to ask the buyer to pay the remaining price;if the buyer's administrator chooses to terminate the contract,the seller has the right to exercise the bankruptcy recovery right of the subject matter.When the buyer's administrator chooses to continue to perform the contract,by referring to the "Remedy for Previous Breach" System in the U.S.bankruptcy law,the debts(including the original payment that has not been performed and the liability for damages except for the original payment)generated under the conditions of continuous performance shall be regarded as the common benefits debt to pay off.If the buyer fails to pay the price in time or dispose of the subject matter improperly,the seller's right to take back the subject matter shall also be limited to ensure the maximum value of the bankruptcy consortium and safeguard the overall interests of other creditors.When the buyer's manager chooses to terminate the contract,the seller has the right to retrieve the subject matter.At this time,through value measurement,we should respect the particularity of the contract of sale with retention of ownership and protect the seller's ownership of the subject matter,so as to apply the theory of "Direct Effect Theory" shall be adopted for the effectiveness of the contract exceptionally and allow the seller to take back the subject matter.As for the liability for damages caused by the impairment of the value of the subject matter due to the buyer's reason,the acceptance of the bankruptcy application shall be taken as the time point.Those occurring before the bankruptcy liquidation procedure shall be paid off as ordinary bankruptcy creditor's rights;those occurring after the bankruptcy liquidation procedure shall be paid off as common interest debts.