the breaching party cannot easily exercise the right to terminate the contract
2024-09-21
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original title: the breaching party cannot easily exercise the right to terminate the contract
qi guozhong, reporter of haidong daily
in 2020, company a and company b signed the "framework agreement" and "construction project construction contract" successively, and the two parties made clear agreements on the construction content, price and payment method of the project involved in the case. the above contract stipulates that company a should pay company b a progress payment of 80% of the completed project volume when company b builds the main body to more than ten floors. at the same time, two months after the start of the project involved in the case, an agreement to use housing to compensate for the project payment was signed to compensate company b for the project payment. later, company b entered the site for construction, but because company a failed to pay the project payment on time, company b stopped work. after sending a letter to no avail, company a sued to terminate the "framework agreement" and "construction project construction contract".
company a claimed that company b had stopped work without authorization and was unable to continue to perform the contract, so it requested to terminate the contract; company b argued that it stopped work because company a failed to pay the progress payment as agreed.
upon investigation, it was found that after company b had completed the main construction of building 17 and building 18, company a only paid 4.901 million yuan in project fees and did not sign an agreement with company b to use housing to offset the project fees. when it filed the lawsuit, it stated that the price of the project that company b had completed was temporarily estimated to be 17 million yuan.
the court held that the proportion of the payment already made did not meet the payment proportion agreed in the above contract, so company b could exercise the right to perform first and stop the construction in accordance with article 526 of the civil code of the people's republic of china. therefore, company a was in breach of contract in this case, but company b was not in breach of contract. moreover, company a failed to pay the corresponding proportion of the progress payment in accordance with the contract, which caused company b to exercise the right to perform first and stop the construction. company b did not clearly express or indicate by its behavior that it would not perform the main obligations of the contract, that is, company a's breach of contract caused company b to delay the performance of its debts. therefore, company a's claim to terminate the contract did not meet the legal provisions and contractual agreements. based on this, the first instance court dismissed its lawsuit and the second instance court upheld the original judgment.
under normal circumstances, as one of the remedies for the non-breaching party, only the non-breaching party has the right to terminate the contract, and the breaching party has no right to terminate the contract. however, in order to break the contract deadlock, achieve substantive justice, and promote the development of the market economy, the breaching party can sue to terminate the contract when the following three conditions are met at the same time, namely: 1. the breaching party must be subjectively non-malicious in suing to terminate the contract; 2. the breaching party continues to perform the contract and is obviously unfair to it; 3. the refusal of the party who abides by the contract to terminate the contract violates the principle of good faith. in this case, company a's claim to terminate the two contracts does not meet the above three conditions.
company a requested to terminate the contract in the event of breach of contract. this breach of trust not only infringed upon the performance interests and trust interests of the party abiding by the contract, but also did not conform to the general rules of business behavior and universal ethics. this year, the supreme people's court report proposed that the people's courts should serve as the "old uncle" of private enterprises, put "strict management and deep love" into practice, and integrate the principle of equal protection under the law into judicial policies and case handling. the private economy is the main force in promoting china's modernization and an important foundation for the high-quality development of the local economy. starting from the principles of honesty, trustworthiness and fairness, this case ruled that the breaching party's right to terminate the contract was invalid, protected the legitimate rights and interests of legally operating enterprises in accordance with the law, advocated the value orientation of honesty and trustworthiness of market entities, and demonstrated the concept and responsibility of the people's courts to serve the overall situation and serve the people. (this case is provided by the haidong intermediate people's court)
source: haidong daily
