In August 2021, Yu and Zhong signed a "Lease Agreement", agreeing to lease the pond to Zhong for fish farming, and Yu should deliver the pond to Zhong on October 30, 2021, with a lease term of ten years, and Zhong should pay a one-time rent for six years. After Zhong paid the rent, Yu did not deliver the reservoir as agreed. Zhong believed that Yu's failure to deliver the reservoir at the agreed time and conditions made it impossible to achieve the purpose of the contract, which constituted a fundamental breach of contract, and sued for the termination of the Lease Agreement and the return of rent and other expenses. During the trial, Yu said that the reservoir involved in the case had met the conditions for delivery on May 2, 2022 and could be delivered to Zhong, but Zhong refused to accept it on the grounds that it had been sued. Disagreement
In this case, there are two views on whether Zhong's purpose of the contract can be realized: The first view is that the main purpose of Zhong's signing of the contract is to obtain the leased property. Zhong had paid the rent in accordance with the contract, and Yu had failed to deliver the leased property as agreed in the contract, resulting in Zhong's purpose of the contract having been frustrated. The second view is that the lease term of the contract involved in the case is 10 years, and Yu's delay in delivering the leased property for six months has little impact on the realization of the purpose of the contract, and if the contract continues to be performed, Zhong's purpose of the contract can still be realized. Commentary
The author agrees with the second point of view. Here's why:
Zhong asserted the statutory right of termination on the grounds that Yu's delay in delivering the leased property made it impossible to achieve the purpose of the lease contract, and the claim was based on the statutory termination of the contract under Article 563, Item 4 of the Civil Code. The circumstances of the statutory right of rescission provided for in this article are the embodiment of the fundamental breach of contract regime. The fundamental breach of contract system strictly restricts the exercise of the right to terminate the contract, and if the contract is terminated in the case of a slight breach, it is not conducive to promoting the completion of the transaction, nor is it conducive to the maintenance of market order and the effective use of resources. In practice,To determine whether a party to a contract is unable to achieve the purpose of the contract due to delay in performance, the interests of both parties to the contract shall be balanced, and a comprehensive judgment shall be made in light of the specific circumstances of the case, taking into account the purpose of the contract that the creditor intends to achieve when signing the contract, the length of the delay, the actual losses caused to the creditor due to the delay, and the importance of the performance period to the realization of the purpose of the contract.
The purpose of the contract is the goal that the parties want to achieve through the conclusion and performance of the contract, which can be comprehensively judged from the content of the contract, the relevant documents negotiated by the parties to the contract for the purpose of concluding the contract, and the transaction customs. In this case, the Lease Agreement involved in the case stipulated that Zhong leased the fish pond for fish farming, and did not mention other special purposes.
Delay in performance fails to achieve the purpose of the contract means that the time of delay is crucial to the realization of the creditor's rights, and the purpose of the contract will be frustrated if the performance exceeds the time limit agreed in the contract. In this case, the Lease Agreement involved in the case stipulated that Yu should deliver the reservoir to Zhong on October 30, 2021, but the parties did not clearly agree on what kind of fish Zhong leased the pond for farming, whether the fish to be cultivated was affected by the seasonal climate, and the expected benefits that Zhong would not be able to obtain if Yu delayed the delivery of the reservoirThe agreed lease term was as long as 10 years, and Yu delayed the delivery of the leased property by six months, which was a small proportion compared with the lease period, and Zhong did not submit evidence to prove that the delay of six months seriously affected the economic benefits that he expected at the time of entering into the contract. Therefore, the delay in performance did not have a material impact on the realization of the purpose of the Lease Agreement involved in the case. At the time of the trial, it had been confirmed that Yu could deliver the reservoir that met the delivery conditions to Zhong, and if he continued to perform the contract, Zhong could still achieve the purpose of the contract when he signed the contract.
*: People's Court Daily.