Study On The Breaching Party’s Termination Of Contract

The dispute over the termination of the contract by the breaching party started with Xinyu Company v.Feng Yumei’s shop sales contract dispute,and it has experienced a development process from individual cases to class cases to standardization.For the first time,the Minutes of the Jiumin Meeting provided detailed and clear provisions on the termination of the contract by the breaching party.Since then,with the Civil Code legislation as the background,the dispute over the termination of the contract by the breaching party has risen to the legislative level.The review draft of the Civil Code has undergone many changes,showing a trend of changes from initial support,to reaffirmation of support,strict qualifications,to deletion of relevant regulations,to appropriate absorption and integration of criticisms to ease the expression.Finally,Article 580,paragraph 2 of the Civil Code provides for the implementation of the issue of termination of the breaching party.On the one hand,the tortuous changes in the legislative process reflect the great controversy over the dissolution of the contract by the breaching party;on the other hand,the overall trend of legislative changes reflects the legislative attitude towards the final acceptance of the termination of the contract by the breaching party under certain circumstances.This article takes the norm changes as the entry point,specifically answers the following questions.Whether the breaking party has sufficient justification to terminate the contract? Which path should the breaching party choose for termination,notification termination or judicial termination? And what restrictions should be imposed on the applicable circumstances and applicable conditions of the breaching party to lift?The first part of this article is the empirical research.Based on the analysis and research of nearly 400 sample cases involving the termination of the breaching party,this article focuses on summarizing the reasons for termination of the breaching party in judicial practice and the court’s theory on the termination of the breaching party in order to grasp the judicial trend.As far as the reason for the termination of the defaulting party is concerned,in practice,the defaulting party may be due to objective reasons(such as changes in market conditions,policy changes,etc.)or subjective reasons(such as deterioration in economic conditions,loss of trust foundation,etc.),or third party’s reason.As far as the court supports,it includes but not limited to,the original Contract Law Article 94,Article 110,the principle of voluntariness,the principle of fairness and good faith,Article 48 of the Minutes of the Jiumin Meeting.The second part of this article is the justification part.This article combines the analysis perspective of economics and adopts the cost-benefit analysis method to comprehensively demonstrate the legitimacy of the breaching party’s termination of the contract from the three perspectives of benefit,cost and substitutability.First of all,the termination of the breaching party is conducive to achieving the balance of interests of both parties to the contract,realizing social public interests,and improving the overall social transaction efficiency,conforming to the Kaldor-Hicks efficiency rule,and can maximize social benefits.Secondly,as far as the observant party is concerned,whether in terms of the observing party’s existing interests or the new obligations that the observing party may bear,allowing the breaching party to terminate the contract will not bring great negative effects to the observing party.As far as society is concerned,the termination of the breaching party does not violate the principle of strict observance of the contract and the principle of good faith,and will not bring great impact to the society.Finally,neither the existing principle of circumstance change nor the derogation rule can fully solve the problem of contract deadlock,and the termination of the breaching party is irreplaceable.In summary,the benefit of the breaching party’s termination of the contract is greater than the cost,and it is irreplaceable.The legitimacy of the breaching party’s termination of the contract can be justified.The third part of this article is the path selection part.On the basis of justifying the termination of the breaching party,this article further discusses the path of the breaching party’s termination of the contract.The traditional way of contract termination mainly includes two forms: notification termination and judicial termination.As for the first one,the termination will take effect as soon as the notice arrives;as for the second one,the judicial termination is the right of litigation.Whether the contract is to be terminated and when it is terminated shall be decided by the judicial agency.Based on the advantages of judicial dissolution compared with notification dissolution,such as neutrality,efficiency in resolving disputes at one time,and restraint,and relevant domestic and foreign experience is available for reference,this article concludes that judicial termination should be appropriate.The fourth part of this article is the specific applicable definition part.This part is divided into two sections.The first section mainly discusses the scope of application of the breaching party to terminate the contract.This article takes the provisions of Article 580,paragraph 2 of the Civil Code as the object of analysis,combined with existing judicial practice,and concludes that the scope of application should be further broadened to include monetary debts.The second section focuses on the applicable conditions for the breaching party to terminate the contract.Combining existing research and internal and external beneficial experience,this article believes that the conditions stipulated in Article 580,paragraph 2 of the Civil Code are too brief,and the conditions for the breaching party to terminate the contract should be further specified.Specifically,the termination of the breaching party shall physically meet the conditions that the contract is difficult to perform,the breaching party’s contractual purpose cannot be achieved,the observant party’s violation of the principle of good faith,and the observing party’s losses can be effectively compensated;in terms of procedures,except for the termination through judicial procedures,it still need to go through the pre-negotiation process.The last part of this article is the conclusion.Aiming at several core issues mentioned in this article,combined with the argumentation ideas of this article,finally draw corresponding conclusions.