There are three types of contract termination: negotiated termination, agreed termination, and statutory termination.
Termination by negotiation and termination by agreement are essentially the result of an agreement between the two parties, the former is a consensus after the fact, and the latter is a consensus at the time of signing the contract and is recorded in the contract. Statutory rescission, on the other hand, means that when a circumstance prescribed by law arises, the contract may be terminated in accordance with the law.
For the provisions on the statutory termination of the parties to the contract in the General Principles of Contract of the Civil Code, see Article 563:
The parties may terminate the contract under any of the following circumstances:
1) The purpose of the contract cannot be achieved due to force majeure;
2) Before the expiration of the performance period, one of the parties clearly indicates or shows by its own conduct that it will not perform the main debt;
3) One of the parties delays the performance of the main debt and fails to perform it within a reasonable period of time after being reminded;
4) One of the parties delays the performance of its obligations or commits other breaches of contract, resulting in the inability to achieve the purpose of the contract;
5) Other circumstances provided for by law.
In the case of an indefinite contract with the content of a continuously performed debt, the parties may terminate the contract at any time, provided that they notify the other party before a reasonable period of time. ”
Except for items (1) and (5), which are not expressly in the case of breach of contract by one party, the others are all terminated due to the breach of contract. However, this provision does not expressly restrict the party claiming the right to rescind the contract to be the non-breaching party. Article 566 of the Civil Code stipulates the handling of the contract after it is terminated, the second paragraph of which stipulates:
If the contract is terminated due to breach of contract, the person with the right to terminate may request the breaching party to bear the liability for breach of contract, unless otherwise agreed by the parties."
Therefore, theoretically, it is not natural that the breaching party cannot unilaterally terminate the contract, but the proposal for termination is a breach of contract and should bear the liability for breach of contract in accordance with the provisions of the above-mentioned Civil Code. However, considering that the agreement of the contract is respected and the interests of the non-breaching party are protected, the breaching party's proposal to terminate the contract cannot be subject to certain restrictions like the non-breaching party, and should only be allowed when there are appropriate and reasonable reasons, otherwise it will inevitably lead to both parties easily abandoning the spirit of the contract, which is not conducive to the development of social integrity.
There is an alien concept of jurisprudence called"Benefit default".In layman's terms, if the default will lead to an increase in the overall benefits of the society, it should be allowed.
For example, if the rent in the market generally drops significantly due to changes in the socio-economic environment, the lessee should be allowed to terminate the contract (and create a new lease by himself), but he needs to bear the liability for breach of contract for early termination. If it is not allowed to be terminated and the lessee is required to continue the lease, it can only benefit the lessor, which is not conducive to the interests of the society as a whole and maintains the rapid market-oriented operation of the leasing market.
"Breach of contract" is not a statutory concept adopted in China, but the Supreme People's Court of China has also adopted a non-absolute concept on the issue of the breaching party's termination of the contract, holding that the breaching party is also allowed to terminate the contract under certain conditions.
Article 48 of the 2019 Minutes of the National Conference on the Trial of Civil and Commercial Cases by Courts (Minutes of the Ninth People's Court) stipulates:
The breaching party shall not have the right to unilaterally terminate the contract. However, in the course of the performance of some long-term contracts, such as housing lease contracts, the two parties form a contractual deadlock, and the breaching party is not allowed to terminate the contract by suing, which is sometimes unfavorable to both parties. Under this premise, if the following conditions are met, and the breaching party sues to request the termination of the contract, the people's court shall support it in accordance with law:
1) There is no malicious breach of contract by the defaulting party;
2) It is obviously unfair to the breaching party to continue to perform the contract;
3) The non-breaching party refuses to terminate the contract, violating the principle of good faith.
If the people's court makes a judgment to terminate the contract, the liability for breach of contract that the breaching party should have borne cannot be reduced or exempted by the termination of the contract. ”
It can be seen that the Supreme People's Court's requirements for the breaching party to terminate the contract are quite strict, and in addition to the three conditions listed, it can also be seen that there is a procedural requirement, that is, needThe lawsuit is dismissed。If the breaching party unilaterally proposes to terminate the contract, but the non-breaching party does not agree, the breaching party and the non-breaching party shall not be allowed to enjoy the same unilateral right of notice of termination, and the breaching party can only sue the court for termination if the non-breaching party does not agree.
Finally, the breaching party has the right to unilaterally terminate the contract, although it is not absolutely non-existent, but it is not taken for granted, and it needs to bear the price of liability for breach of contract. Therefore, in practice, there should be no way to breach the contract and propose to terminate the contract, otherwise the gains may outweigh the losses.
I hope you found this article helpful! February** Dynamic Incentive Program
Featured article recommendation
How to adjust the liquidated damages if the agreement is too high? There are new provisions on the interpretation of the General Principles of Contract in the Civil Code, and if there is a dispute over the handling of the contract after the termination of the contract, you should try not to agree to the termination, and be careful of the six key points that the court should pay attention to when entering into a non-compete agreement. What to look out for?