Study On The Legal Issues Of Fictitious Accounts Receivable In Factoring Contracts

Article 763 of the People’s Republic of China(hereinafter referred to as the “Civil Code”)stipulates that the scope of application of accounts receivable in the factoring contracts,the exercise of the right to defense,and the review obligations of the factors.However,the provisions of issues such as the impact of fictional receivables in the factoring contracts on the effectiveness of the factoring contracts and the legal effects of fictional receivables are too abstract.At the same time,the growth of factoring cases in practice has increased year by year,and fictional accounts receivable have become one of the biggest risks of the factoring business.Therefore,the legal issues of fictional receivables in research factoring contracts are of certain significance.Based on the types of fictitious accounts receivable in factoring contracts that already exist in practice,fictitious accounts receivable in factoring contracts can be divided into three categories: unilateral fictitious accounts receivable by creditors,collusion between creditors and factors to fabricate accounts receivable,and collusion between creditors and debtors to fabricate accounts receivable.The study of these issues will help lay the foundation for subsequent research.The basic contracts and the factoring contracts are two independent contracts,and fictional accounts receivable do not necessarily result in the invalidity of the factoring contracts.However,different types of fictional accounts receivable have different impacts on the effectiveness of the factoring contracts.In the case of fictitious accounts receivable,the situations where the factoring contract is valid include: Firstly,the creditor’s fictitious accounts receivable are wrongly confirmed by the debtor;Secondly,creditors and debtors conspire to fabricate accounts receivable as factoring,but the subjective state of the factor is “not knowingly”.The situations where a factoring contract is invalid include: Firstly,the creditor and the factoring agent conspire to fabricate accounts receivable for factoring,and the factoring contract is invalid regardless of whether the purpose is to infringe on the debtor’s rights or borrow money;Secondly,creditor and debtor conspire to fabricate accounts receivable as factoring,but the subjective state of the factor is “knowingly”;The situations where a factoring contract can be revoked include: the creditor unilaterally fabricating accounts receivable to defraud the factor of financing funds.According to Article 763 of the Civil Code,when the debtor makes a defense on the ground of fictitious receivables,the factor must be “knowing” as the subjective element in order to succeed in the defense,which means that the subjective state of the factor has an impact on the debtor’s exercise of the right to defense.“Knowingly” should be further expanded to mean “know or ought to have known”.At the same time,the debtor’s exercise of defense is properly protected and the debtor’s confirmation of the assignment of receivables should not be considered a waiver of the defense.The exercise of the factor’s right of recourse and claim should not be restricted,and there is no order in which there is no order.During the consultation,the factors found that the creditors’ accounts receivable separately were fictional,and the creditors could ask the creditors to bear the responsibility of contractual negligence.After the factoring contract takes effect,if the account receivable is fictional,it can not recover the financing funds,and the creditors and debtors may bear the corresponding responsibilities according to the different circumstances of the deficiency of account receivables.