On The Nature Of The Right To Price Reduction And Its Application

Due to the lack of research on the price reduction(die Minderung)in our academic community for a long time and the roughness of the price reduction regulations in the positive law,around the core issue,characterization of the right to price reduction,a series of debates have occurred among the academic and practical communities of our country,which revealed the hidden worries about the disconnect between theory and practice of our country’s legal community.Under the trend of comparative law to set price reduction as a general remedy for breach of contract,Article 582 of the Civil Code of the People’s Republic of China inherits the legislative regulations of Article 111 of the Contract Law of the People’s Republic of China that stipulate price reduction in the general principles of contract law.It also urges the academic community to step out of the scope of the traditional warranty law in sales contract and re-examine the nature of the right to price reduction,which is based on the general remedy for breach of contract.After clarifying the nature of the right,we ought to elaborate on the specific legal application issues of price reduction.This article is divided into three chapters.The first chapter sorts out the two major theories which have controversy surrounding the characterization of the right to price reduction in our country’s academic community,namely the respective meanings of the“claim theory” and the “right of formation theory”,the reasons for their arguments,the lower extension theories under the two theories mentioned above,and the relationship among them and the relevant provisions of both the old and new German Civil Code including their related theories.Then with the contradiction in the opinion of the nature of the right to price reduction within the Second Civil Division of the Supreme People’s Court,it reveals the practical dilemma of the characterization of the nature of the right to price reduction.Subsequently,in our country’s judicial practice,the discovery of three controversies surrounding the application of price reductions,namely,“different calculation standards for the amount of price reduction”,“unclear relationship between price reduction and damages”,and “court self-applying price reduction”,effectively illustrates that the position of right to price reduction in our country’s positive law system is still unclear.After summarizing the above content with the help of relevant judicial judgments,the “claim theory” is denied from the following four aspects:difficult semantic interpretation,violation of the sense of justice,unclear duty content,and support from comparative law experience.Chapter Two demonstrates the rationality and superiority of defining the right to price reduction as the right to adjust the contract(Vertragsanpassung)of rights of action of formation on the basis of its being general remedy for breach of contract.Judging from the historical context of the development of price reduction,it has gradually expanded the scope of application from actio quanti minoris in which the types of the object and the trading venues are restricted in the sales law,to the general remedy for breach of contract represented by Article 1223 of the French Civil Code.In this process,its functional positioning has not changed,that is,the restoration of the subjective equivalence between the synallagmatic payment(Leistung)and the reciprocal payment against delivery(Gegenleistung)in the bilateral contract.German law denies the status of the right to reduction as a general remedy for breach of contract because of the service contract(Dienstvertrag).However,this legislative decision is totally wrong as it ignores that the right to price reduction has its room for application in the service contract.In contrast,in our country,there is no problem that service contracts hinder the general remedy status of right to price reduction,and the general remedy status of price reduction has also been recognized in judicial practice.From the point of view of the normative purpose of the right to price reduction,it is more compatible with the Distoventral right to adjust the contract.In addition,the theory of pure right of formation has two major drawbacks: the premise of the rationality of the allocation of right of formation and the inability to run through the whole process of price reduction only by the will of the formation right holders,and they will be more severe under the background of price reduction as a general remedy for breach of contract.Therefore,the right to price reduction should not be defined as the right to adjust the contract of pure rights of formation.Comparing the right to price reduction with the right to adjust the contract for a change of situation,it can be found that price reduction has more advantages in consideration of factors,difficulty of realization,and predictability of results.Therefore,it is reasonable to classify the right to price reduction as one type of right of action of formation.In addition,defining the right to price reduction as a right of action not only can positively respond to and compensate for the two major drawbacks of the pure right of formation,but also has other advantages.The third chapter discusses the specific application of right to price reduction after clarifying its nature as a right to adjust the contract belonging to right of action of formation.The right to price reduction has both positive and negative elements.The positive elements include the debtor’s incomplete payment,the creditor’s acceptance of the incomplete payment,and the creditor’s notification of the incomplete payment to the debtor.Since defects cannot be corrected in a contract with time factor,subsequent performance does not naturally take precedence over price reduction in application.The negative elements of the right to price reduction include that the creditor knew or should have known at the time of the conclusion of the contract that the performance was incomplete,the incomplete payment was mainly or completely attributable to the creditor,the creditor did not notify the debtor of its incomplete payment,the payment value which conforms the contract is consistent with the actual payment value and the parties of the contract specifically exclude the right to price reduction,which counts five in total.Because the right to price reduction is a kind of right of action of formation,its exercise should be realized by the creditor’s appeal to the court or arbitration institution for price reduction.After the creditor enters the litigation procedure in response to the lawsuit for the price sued by the debtor,the creditor who wants to exercise the right to price reduction shall file a counterclaim.As for the procedural structure of an appeal for price reduction,there will be no major difference in structure between the creditor’s initiative or passive participation.The litigation procedure for price reduction initiated by the creditor initiatively can be set as the prototype for the realization of the right to price reduction.In terms of how to calculate the price reduction amount,the proportional calculation method meets the normative purpose of the right to price reduction and should be supported.In terms of the calculation time of the price reduction,the time when the debtor actually performs his payment obligation shall prevail.With the court’s decision in support of the creditor,which means the creditor’s right to reduce prices is realized,the price or remuneration originally agreed in the contract should be reduced accordingly and the subjective equivalence relationship between the price or remuneration originally agreed in the contract and the debtor’s principal payment obligation as agreed in the contract should be restored.In the case that the creditor has paid the contractual price or remuneration,the debtor shall return the corresponding amount of price or remuneration to the creditor based on the principle of full restitution;the realization of the right to price reduction also excludes the subsequent application of rights of rescission or termination of the contract and damages in principle,but exceptions should be allowed for the creditor’s misunderstanding of the defect and the discovery of subsequent hidden defects.