Research On Right To Terminate The Contract Of The Defaulting Party

Since the Supreme People’s Court announced the “Xinyu Company v.Feng Yumei” case,the debate over whether the defaulting party can claim the termination of the contract has never ceased.In practice,similar cases are increasing daily.As the people’s courts do not have clear and logically sufficient normative guidelines for such cases,the courts have different orientations in actual judgments,and the reasons for the judgments are also different.In order to clarify that the defaulting party’s right to terminate the contract has a reasonable form and exercise norms,the “Civil Code” and the “Minutes of the National Court Civil and Commercial Trial Working Conference” have successively made a new exercise of the right to terminate the contract.However,due to the inherent moral hazard and persistent controversy associated with this right,even the newly issued regulations still evade key issues such as whether the defaulting party can exercise the right to terminate the contract.The establishment of Article 580,paragraph 2of the newly promulgated “Civil Code” is more like leaving an operational space for the handling of similar contract deadlocks when the defaulting party breaks away from the contractual rights and obligations,similar to the “judicial dissolution”.There is no such kind of contract termination path within our country’s territory before.If the relevant procedural restrictions are not added,and the law only “results in the inability to achieve the purpose of the contract” as the basis,there is a possibility of exceeding expected moral hazard and profit-seeking breach of contract.Remedies after contract breach can be divided into contract termination,continued performance and alternative performance.From the empirical research of related cases and the literature analysis of scholars in the field in recent years,it can be seen that when the contract is deadlocked,even if the observant party does not exercise the right to terminate the contract,the defaulting party has no reason to unilaterally exercise the statutory right to terminate the contract.In essence,if the defaulting party’s right to terminate the contract is regarded as a statutory right of termination,it is equivalent to the defaulting party’s breach of contract and the right to choose the contract remedy to the defaulting party,and choose among the above three remedies Termination of Contract.This is essentially contrary to the legislative intent of the right to terminate the contract,and the statutory right of termination as the right of formation requires the existence of a reasonable and legal source of legitimacy and necessary restrictive means.The theory of efficiency breach of contract,the theory of prohibiting the abuse of rights and the principle of balance of interests,no matter from the perspective of legal value,applicable environment and characteristics of different legal systems,can not effectively prove the rationality of the application of the defaulting party’s right to terminate the contract in my country.In the overseas legislative investigation,even in the common law countries that hold the theory of “efficiency breach of contract”,when the contract rights and obligations are terminated due to breach of contract,priority is given to protecting the interests of the observant party as the judgment principle.According to the principle of strict observance of the contract,the contract should be continued if the observant party with the right to terminate the contract does not terminate the contract,which reflects the principle of good faith and the protection of social transaction order.But if this kind of protection goes to extremes,it will be counterproductive.By drawing lessons from the “cooling-off period” system in Marriage and Family Compilation of Civil Code,a “consensus formation period” is set for both parties in the deadlock.Its essence is to restrict the defaulting party from arbitrarily proposing to terminate the contract,and at the same time give the defaulting party a reasonable voice channel.Through the reasonable allocation of “transaction costs”,both parties to the contract can save themselves from the contractual relationship.This measure,as the pre-procedure of Article 580,paragraph 2,may effectively reduce judicial interference in the direction of contract,and it is also a full embodiment of the principle of autonomy in private law.Under the background of current law,the defaulting party should not have the legal right to terminate the contract,and the legal way to break away from the contract should be to apply for judicial termination on the premise of fully saving itself with the observant party.