Author: Lawyer Liu Chongwei.
Article 27 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the General Principles of Contract in the Civil Code of the People's Republic of China stipulates that: "The debtor or a third party and the creditorAn agreement to settle debts in kind is reached after the expiration of the debt performance periodThere is no circumstance affecting the validity of the contractThe people's court shall find that the agreement takes effect when the parties express the same intention
After the debtor or a third party performs the agreement to settle debts in kind, the people's court shall determine that the corresponding original debts are extinguished at the same time;Where the debtor or a third party fails to perform the agreement on the payment of debts in kind as agreed, and still fails to perform within a reasonable period of time after being demanded, and the creditor chooses to request performance of the original debt or the agreement to settle debts in kind, the people's court shall support it, except as otherwise provided by law or otherwise agreed by the parties.
Where the agreement in rem provided for in the preceding paragraph is confirmed by the people's court, or the people's court drafts a mediation document on the basis of the agreement reached by the partiesWhere a creditor's claim for property rights has changed since the confirmation or mediation document took effect, or has effect against a bona fide third party, the people's court will not support it
Where the debtor or a third party concludes an agreement to settle debts in kind with their property rights that they do not enjoy ownership or disposition, it is to be handled in accordance with the provisions of article 19 of this interpretation. ”
Article 28 stipulates: "The debtor or a third party and the creditorAn agreement to settle debts in kind is reached before the expiration of the period for performance of debtsThe people's court shall determine the validity of the agreement on the basis of the trial of the creditor's rights and debts.
Where the parties agree that the debtor fails to pay off the debts when due, and the creditor may auction, sell, or discount the debtor's property to realize the creditor's rights, the people's court shall find that the agreement is valid. Where the parties agree that the debtor fails to pay off the debts when due, and the debtor's property is owned by the creditor, the people's court shall find that the agreement is invalid, but without affecting the validity of the other parts;Where a creditor requests that the debtor's property be auctioned, sold, or discounted to realize the creditor's rights, the people's court shall support it.
Where the debtor or a third party fails to transfer the property rights to the creditor's name after the parties have entered into an agreement to settle debts in kind as provided for in the preceding paragraph, and the creditor claims priority for repayment, the people's court shall not support it;If the debtor or a third party has transferred the property rights to the creditor's name, it shall be handled in accordance with the provisions of Article 68 of the Interpretation of the Supreme People's Court on the Application of the Civil Code of the People's Republic of China on the Security System. ”
According to the above provisions, whether the agreement in rem is valid or not is divided into two situations according to the time when the agreement is reached:
1. An agreement in kind is reached after the expiration of the period for the performance of the debt, and the agreement is valid and takes effect when the parties express their unanimous intentions. If the debtor or a third party fails to perform the debt-in-kind agreement as agreed, the creditor has the right to request performance of the debt-in-kind agreement. It should be noted that the validity of the debt-in-rem agreement only produces the effect of creditor's rights, not the effect of real rights, and even if the debt-in-rem agreement is confirmed by the people's court or the people's court makes a mediation document based on the debt-in-rem agreement reached by the parties, the creditor shall not claim that the property rights have changed since the confirmation or mediation agreement took effect, or have effect against bona fide third parties.
2. If an agreement is reached before the expiration of the period for the performance of the debt, if it is agreed that the debtor fails to pay off the debt when due, and the property is owned by the creditor, the agreement shall be invalid. For the property to be redeemed for debts, it may be agreed that if the debtor fails to pay off the debts when due, the creditor may auction, sell or discount the property to realize the creditor's rights.