Study Of Factor’s Duty To Reasonably Examine Accounts Receivable

Carrying out factoring business as a financing tool plays an important role in unblocking the funding chain of small and medium-sized enterprises.However,in judicial practice,the phenomenon of companies fabricating accounts receivable in order to obtain financing funds more quickly has been repeatedly prohibited.Not only has it not played a role in obtaining financing funds,but it has also led to more cautious approval and disbursement of funds by factoring personnel,which goes against the original intention of the factoring industry.In order to curb the proliferation of fictitious accounts receivable,the Civil Code has separated factoring contracts into separate chapters,and Article 763 responds to this: if the creditor and debtor of the accounts receivable use fictitious accounts receivable as the transfer subject and enter into factoring contracts with the factoring party,the debtor of the accounts receivable may not oppose the factoring party on the grounds that the accounts receivable do not exist,unless the factoring party is aware of the fiction.By exploring the legislative meaning of this article,it can be seen that the "non knowingly" good faith state of the factoring party needs to be fulfilled through external review obligations.Therefore,to solve the confusion of fictitious accounts receivable,it is necessary to clarify the review obligations of the factoring agent.However,in practice,there are issues with the review obligation of the factorier,such as unclear scope,inconsistent standards,and lack of consensus in good faith judgment.Starting from judicial cases,the author elaborates and analyzes these issues to determine the scope of the factorier’s review,clarify the review standards,and form a reasonable judgment in good faith when fabricating accounts receivable.This article is divided into four chapters.The first chapter of this article is based on the current judicial judgment status of the reasonable review obligation of factoriers for accounts receivable.Three typical cases are selected,and through the analysis of the cases,the following three aspects are extracted and the views of this article are proposed: firstly,the scope of factoring review varies,and the divergence lies in whether industry norms such as banking can serve as a basis for measuring the reasonable review obligation performance of factoriers.Regarding this point,The author believes that these norms are not mandatory legal norms and cannot serve as a basis for judging the obligation of review.Secondly,the reasonable standards for reviewing obligations vary.Some courts advocate for formal review,while others advocate for substantive review.From a judicial perspective,which choice is more in line with the requirements? The author takes into account the third-party status of the factoring party and focuses on formal examination,believing that substantive examination will increase the burden on the factoring party.The third issue is the inconsistency in the criteria for determining the goodwill of the factoring party in fictitious accounts receivable disputes.Some scholars advocate using "knowing" to determine goodwill,while others advocate taking into account gross negligence when determining goodwill based on "knowing".The author agrees with the latter viewpoint,as gross negligence is equivalent to the liability of the debtor’s intentional act.Chapter 2 explores the basis for the reasonable review obligation of the factoring party.The author will discuss the sources of the review obligation from the perspectives of trust interest protection and appearancism.This discussion not only demonstrates the necessity of the existence of the reasonable review obligation,but also responds to the issue of inconsistent review standards for the factoring party in Case 2,striving to lay a theoretical foundation for the application of formal review.Chapter 3 introduces the review of the underlying transaction relationship by the factoring party.On the one hand,it further affirms the practicality of formal review through criticism of substantive review,and on the other hand,it points out the specific content of the factoring party’s verification of the underlying transaction information and the identity of the debtor,clarifying the specific review content of the factoring party in fulfilling the factoring contract.This is a response to the issue of inconsistent scope of review by the factoring party reflected in Case 1.Chapter 4 focuses on how to determine the goodwill of the factoring party under the premise of fictitious accounts receivable,which is a response to the problem of no consensus on goodwill judgment in Case 3.The author will adopt a case analysis method to explain.If we want to form a judgment on the goodwill of the factoring party,we need to clarify the scope of goodwill protection in the review of the factoring party.The Civil Code limits the scope of goodwill protection to a state of "non knowledge".Through a typological analysis of gross negligence,general negligence,and minor negligence,the author compares the balance of interests between the debtor’s intention and the different degrees of negligence of the factoring party,Conclusion:Gross negligence should also be included in the scope of "knowing" or excluded from the scope of protection together with "knowing".Based on judicial cases,this study explores the determination of goodwill when fabricating accounts receivable from two common perspectives:reviewing negligence and debtor’s payment commitment.