Shandong High Law
A chemical company in Qingzhou City v. a tire company and a third party, a transaction contract dispute between a trading company
-- Distinction between debt transfer and performance by a third party
(Image source network invasion and deletion)
Summary of the trial
To distinguish between the transfer of debts and the performance of a third party on behalf of the creditor, the true meaning of the parties can be explored from five aspects: (1) whether the third party clearly indicates to the creditor that it bears all debts; (2) whether the debtor has withdrawn from the original debt; (3) whether the third party has formed a new creditor-debtor relationship with the creditor; (4) whether the third party has made a specific commitment to the performance of the new debt; and (5) whether the third party bears the liability for breach of contract for the new debt. If the original debtor withdraws from the creditor-debtor relationship after the creditor, the debtor and the third party jointly sign the Creditor's Rights and Debts Transfer Agreement, and the third party signs a new Debt Repayment Agreement with the creditor and issues a repayment plan, the nature of the tripartite agreement shall still be deemed to be a debt transfer, even if there are multiple expressions of "repayment on behalf of" in the original tripartite agreement. In the legal relationship of debt transfer, if the creditor requests the original debtor to bear the responsibility for repayment and breach of contract when the third party is unable to perform the debt, it will not be supported in accordance with law.
Basic facts of the case
A chemical company in Qingzhou City claimed that a tire company and a chemical company in Qingzhou City signed a "Product Sales Contract", agreeing that a chemical company in Qingzhou City would supply carbon black to a tire company. As of October 4, 2010, a tire company owed a total of 4,456,400 yuan to a chemical company in Qingzhou City. XX Tire Company, Qingzhou XX Chemical Company, XX Trading Company signed the "Tripartite Creditor's Rights and Debts Transfer Agreement", which clearly stipulates that XX Trading Company shall perform its debts to XX Chemical Company in Qingzhou City, but XX Trading Company does not perform its debts, XX Tire Company shall bear the liability for breach of contract to XX Chemical Company in Qingzhou City. In this case, a third party settled on behalf of the debtor rather than a debt transfer. Request for an order: XX tire company to pay 4,456,400 yuan to a chemical company in Qingzhou City, and compensate for liquidated damages from February 1, 2012 to the date of actual payment according to the standard of 5/10,000 per day of the total amount of arrears (of which the amount temporarily calculated to April 30, 2014 for 814 days is 1813754 yuan).
XX Tire Company argued that the "Tripartite Creditor's Rights and Debts Transfer Agreement" is the true expression of the three parties, which is legal and valid, and the debt transfer has been completed, and XX Tire Company should not be liable for repayment by a certain chemical company in Qingzhou City.
On May 18, 2010, a certain tire company and a certain chemical company in Qingzhou City signed the "Product Sales Contract", stipulating that a chemical company in Qingzhou City would supply carbon black to a certain tire company, and agreed on the product name, model, unit price, payment method and term. As of October 4, 2010, a certain tire company owed a total of 4,456,400 yuan to a chemical company in Qingzhou City, and the two parties did not continue to perform the contract after that. On October 18, 2011, a certain tire company, a certain chemical company in Qingzhou City, and a certain trading company signed the "Tripartite Creditor's Rights and Debts Transfer Agreement", stipulating: (1) a certain tire company confirmed that it owed 4,456,400 yuan to a chemical company in Qingzhou City; (2) A certain trading company agreed to repay the payment of 4,456,400 yuan owed to a chemical company in Qingzhou City on behalf of a certain tire company; (3) A chemical company in Qingzhou City agreed that the amount owed by a tire company of 4,456,400 yuan would be repaid by a trading company on behalf of a tire company; (4) XX tire company agrees to transfer the payment owed to a chemical company in Qingzhou City to the account of XX trading company; (5) A chemical company in Qingzhou City does not assume the legal responsibility for repaying the creditor's rights and debts between a tire company and a trading company. On the same day, a chemical company in Qingzhou City and a trading company signed a "debt repayment agreement" stipulating: (1) the original tire company owed a chemical company in Qingzhou City a payment of 4,456,400 yuan, and a certain trading company agreed to repay on behalf of the company, and the tripartite transfer agreement was signed on October 18, 2011. (2) XX Trading Company guarantees that the arrears will be repaid in cash in three batches from October 2011 to the end of January 2012 from the date of signing this agreement. (3) A chemical company in Qingzhou City agreed to pay a commission of 456,400 yuan to a trading company, which can be deducted at one time when settling the arrears. (4) Liability for breach of this agreement: If there is a unilateral breach, the breaching party shall bear the liquidated damages of 5/10,000 per day from the date of breach, and the non-breaching party shall deal with and resolve the damages.
On October 19, 2011, a certain trading company issued an "IOU" to a chemical company in Qingzhou City: a chemical company in Qingzhou City owes 4,456,400 yuan (signed by Zhang Mouzhan, the legal representative of a certain trading company, and stamped by the company), and on the same day, a chemical company in Qingzhou City issued a receipt of 4,456,400 yuan to a tire company. On October 19, 2011, a certain tire company delivered tires worth 4,456,400 yuan to a certain trading company, and a certain trading company issued two receipts totaling 4456374 yuan to a certain tire company, and then a certain tire company issued a receipt to a certain trading company, indicating that "received a transfer from a certain trading company (a chemical company in Qingzhou City) and a hundred thousand yuan of ten thousand yuan." "On October 31, 2011, a certain tire company issued four value-added tax invoices to a certain trading company, totaling 4456374 yuan. On November 23, 2013, Zhang Mouzhan wrote on the above-mentioned "IOU": Because our company has not been able to repay the payment so far, the payment owed by this article has not been repaid. Today, I promise again to pay off the arrears in batches within two years (signed by Zhang Mouzhan). A certain tire company and a certain chemical company in Qingzhou City have not paid off the above debts so far.
The legal representative of the company, Zhang Mouzhan, died during the trial of the case, and his heirs were his wife Lu and son Zhang Moumin, both of whom stated that they would not inherit their shareholder qualifications, would not inherit the company's rights and interests, and would not participate in the litigation of this case. During the trial, a certain chemical company in Qingzhou City clearly did not require a certain trading company to bear the responsibility for repayment. On July 26, 2019, the Jiaozuo Intermediate People's Court issued the (2019) Yu 08 Po Shen No. 7 Civil Ruling, ruling to accept the reorganization application of a certain tire company; On April 21, 2020, Li Mouguang, the legal representative of a chemical company in Qingzhou City, passed away due to illness, and the industrial and commercial change registration procedures for the legal representative of a chemical company in Qingzhou City have not yet been completed.
On December 17, 2014, the Intermediate People's Court of Jiaozuo City, Henan Province, rendered the (2014) Jiao Min Er Chu Zi No. 10 Civil Judgment: the defendant XX Tire Company shall pay the plaintiff Qingzhou XX Chemical Company RMB 4,456,400 and liquidated damages within 10 days after this judgment takes effect. On March 14, 2017, the Jiaozuo Intermediate People's Court of Henan Province issued the (2017) Yu 08 Min Jian No. 3 Civil Ruling, which retried the case, and rendered the (2017) Yu 08 Min Zai No. 27 Civil Judgment on September 11, 2017: 1. Revoke the (2014) Jiao Min Er Chu Zi No. 00010 Civil Judgment of the Intermediate People's Court of Jiaozuo City, Henan Province; 2. The litigation claims of a chemical company in Qingzhou City are rejected. A chemical company in Qingzhou City was dissatisfied and appealed. On December 11, 2017, the Henan Provincial High People's Court rendered the (2017) Yu Min Zhong No. 1188 Civil Ruling: 1. Revoke the (2017) Yu 08 Min Zai No. 27 Civil Judgment of the Intermediate People's Court of Jiaozuo City, Henan Province; 2. The case was remanded to the Intermediate People's Court of Jiaozuo City, Henan Province for retrial. On December 13, 2018, the Intermediate People's Court of Jiaozuo City, Henan Province, rendered the (2018) Yu 08 Min Zai No. 17 Civil Judgment: 1. Revoke the (2014) Jiao Min Er Chu Zi No. 00010 Civil Judgment of the Intermediate People's Court of Jiaozuo City, Henan Province; 2. The litigation claims of the plaintiff in the original trial, a chemical company in Qingzhou City, are rejected. After the appeal of a chemical company in Qingzhou City, the Henan Provincial High People's Court rendered the (2019) Yu Min Zai No. 222 Civil Judgment on May 25, 2020: rejecting the appeal and upholding the original judgment. After the judgment took effect, a chemical company in Qingzhou City applied to the Supreme People's Court for a retrial, and the Supreme People's Court issued the (2021) Zui Gao Fa Min Shen No. 1559 Civil Ruling on May 28, 2021: rejecting the application for retrial of a chemical company in Qingzhou City.
Grounds for the Trial
The effective judgment of the court held that the focus of this case was how to determine the legal relationship between a certain tire company, a certain chemical company in Qingzhou City, and a certain trading company, and whether the litigation claim of a certain chemical company in Qingzhou City should be supported.
1. A transfer of debts is constituted between a certain tire company, a certain chemical company in Qingzhou City, and a certain trading company. Article 84 of the Contract Law of the People's Republic of China stipulates that "if the debtor transfers all or part of the obligations under the contract to a third party, it shall obtain the consent of the creditor"; Article 85 stipulates that "if the obligation to transfer debts is obligated, the new debtor may assert the original debtor's defense against the creditor"; Article 86 stipulates that "if the debtor transfers its obligations, the new debtor shall assume the subordinate debts related to the principal debt, unless the subordinate debts are exclusive to the original debtor". According to the above-mentioned legal provisions, in the case of the debtor's transfer of obligations, the debtor withdraws from the original contractual relationship after transferring all obligations, and the third party becomes a party to the contractual relationship. If the third party fails to perform in accordance with the contract, the creditor can directly request the third party to perform its obligations, but cannot again require the original debtor to perform its obligations. In this case, in the "Tripartite Creditor's Rights and Debts Transfer Agreement" signed by XX Tire Company, XX Chemical Company and XX Trading Company on October 18, 2011, it was clearly stipulated that "XX Chemical Company in Qingzhou City agreed that the payment of 4,456,400 yuan owed by XX Tire Company would be repaid by XX Trading Company on behalf of XX Tire Company, and XX Tire Company agreed that the payment owed to XX Chemical Company in Qingzhou City would be transferred to the account of XX Trading Company". The agreement shows that XX Tire Company will transfer its debts to XX Trading Company, and XX Chemical Company in Qingzhou City participates in the signing of the agreement, indicating that it agrees to the transfer of debts as a creditor. On October 19, 2011, a chemical company in Qingzhou City issued a receipt to a tire company, and the tire company withdrew from the creditor's rights and debts relationship with a chemical company in Qingzhou City. On the same day, a certain chemical company in Qingzhou City signed a "debt repayment agreement" with a certain trading company, and a certain trading company issued an IOU to a certain chemical company in Qingzhou City, and a certain trading company replaced a certain tire company and formed a new creditor's rights and debts relationship between a certain chemical company in Qingzhou City. The specific acts of the above-mentioned three parties after signing the Tripartite Creditor's Rights and Debts Transfer Agreement indicate that the three parties have actually performed the debt transfer by their respective acts. As the bearer of the debts involved in the case, a certain trading company should bear the responsibility for repayment to a certain chemical company in Qingzhou City, and there is no legal basis for a certain chemical company in Qingzhou City to claim the creditor's rights against a certain tire company.
2. The reason that a certain chemical company in Qingzhou City claimed that all parties should be determined to perform the debts on behalf of a certain trading company cannot be established. A certain chemical company in Qingzhou City asserted that although the tripartite agreement was called "transfer of creditor's rights and debts", the expression "repayment on behalf of others" was used in many places in the agreement, and the true intention of the parties should be determined to be that a certain trading company performed the debts on behalf of a certain trading company, and the first-instance judgment found that the debt transfer relationship was wrong, and the debts involved in the case should be borne by a certain tire company. In this regard, Article 65 of the Contract Law of the People's Republic of China stipulates that "if the parties agree that a third party shall perform the debt to the creditor, and the third party fails to perform the debt or the performance of the debt does not conform to the agreement, the debtor shall bear the liability for breach of contract to the creditor". Therefore, in the case of substitute performance by a third party, the debtor is not exempted from the obligation to perform the obligation; If the third party has not joined the contractual relationship, and the third party's performance is defective, the creditor may require the debtor to bear the liability for breach of contract. In this case, after a certain trading company issued an IOU to a chemical company in Qingzhou City to join the contractual relationship, the two parties agreed on the repayment period, commission and liability for breach of contract in the Debt Repayment Agreement. The above-mentioned acts of a certain chemical company in Qingzhou City and a certain trading company should be regarded as a new agreement on the civil rights and obligations of the two parties on the basis of the creditor's rights and debts formed between the original Qingzhou XX Chemical Company and a certain tire company due to the arrears of payment for the goods of a certain tire company, and further clarified that a new creditor's rights and debts relationship was formed between a certain chemical company in Qingzhou City and a certain trading company. And after a lapse of two years, a certain trading company failed to repay the debts as agreed, and Zhang Mouzhan, the legal representative of a certain trading company, noted on the IOU issued by a certain trading company for a certain chemical company in Qingzhou City, "pay off the arrears in batches within two years", it should be deemed that a certain chemical company in Qingzhou City still has no objection to the new creditor's rights and debts relationship formed between a certain trading company and a certain trading company at this time, and a certain chemical company in Qingzhou City recognized a certain trading company as the debtor and accepted the commitment of a certain trading company to "pay off the arrears in batches within two years". Therefore, the claim of a certain chemical company in Qingzhou City to substitute the performance of the legal relationship with a certain tire company and a certain trading company for a third party does not comply with the provisions of Article 65 of the Contract Law of the People's Republic of China, and the grounds of appeal of a certain chemical company in Qingzhou City cannot be established.
3. While a certain chemical company in Qingzhou City requested confirmation that a certain tire company owed it money, it also required a certain tire company to bear the corresponding liability for breach of contract. The basis for this claim of a certain chemical company in Qingzhou City is the "Debt Repayment Agreement" signed between it and a certain trading company, and there is no agreement on liquidated damages between a certain chemical company in Qingzhou City and a certain tire company, so the litigation claim of a certain chemical company in Qingzhou City also contradicts its claim that the legal relationship between the three parties is a third-party substitute performance, and its litigation claim should not be supported. To sum up, the reason for a chemical company in Qingzhou City to request an order for a tire company to pay its payment and liquidated damages cannot be established and should be rejected.
Associate indexes
Article 523 of the Civil Code of the People's Republic of China Where the parties agree that a third party shall perform the debt to the creditor, and the third party fails to perform the debt or the performance of the debt does not conform to the agreement, the debtor shall bear the liability for breach of contract to the creditor.
Article 551 of the Civil Code of the People's Republic of China Where the debtor transfers all or part of the debt to a third party, it shall obtain the consent of the creditor.
The debtor or a third party may urge the creditor to agree within a reasonable period of time, and if the creditor fails to express it, it shall be deemed to have disagreed.
Article 553 of the Civil Code of the People's Republic of China Where the debtor transfers debts, the new debtor may assert the original debtor's defense against the creditor; If the original debtor has a creditor's right against the creditor, the new debtor may not claim set-off against the creditor.
Article 554 of the Civil Code of the People's Republic of China: Where the debtor transfers debts, the new debtor shall bear the subordinate debts related to the principal debts, except that the subordinate debts are exclusive to the original debtor.
(Articles 65 and 84 of the Contract Law of the People's Republic of China, which came into effect on October 1, 1999, are applicable in this case)
First instance: Intermediate People's Court of Jiaozuo City, Henan Province (2014) Jiao Min Er Chu Zi No. 00010 Civil Judgment (December 17, 2014) Retrial: Intermediate People's Court of Jiaozuo City, Henan Province (2017) Yu 08 Min Zai No. 27 Civil Judgment (September 11, 2017)
Second instance: Henan Provincial High People's Court (2017) Yu Min Zhong No. 1188 Civil Ruling (December 11, 2017)
Retrial: Intermediate People's Court of Jiaozuo City, Henan Province (2018) Yu 08 Min Zai No. 17 Civil Judgment (December 13, 2018)
Second instance: Henan Provincial High People's Court (2019) Yu Min Zai No. 222 Civil Judgment (May 25, 2020)
Retrial review: Supreme People's Court (2021) Zui Gao Fa Min Shen No. 1559 Civil Ruling (May 28, 2021)
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Source: People's Court Case Database(2023-08-2-084-008)