[Direct answer]In the Beijing area, it applies to parties with mutual debts and a sequential order of performance, where the party performing first fails to perform or performs in a manner that does not comply with the agreement. According to Article 526 of the Civil Code of the People's Republic of China, when parties have mutual debts and a sequential order of performance, if the party performing first fails to perform, the party performing later has the right to refuse its request for performance; if the party performing first performs the debt in a manner that does not comply with the agreement, the party performing later has the right to refuse its corresponding request for performance. Therefore, the applicable conditions include: both parties have mutual debts, there is a sequential order of performance, and the party performing first fails to perform or performs in a manner that does not comply with the agreement. Exercising this right does not constitute a breach of contract, but attention should be paid to the limits of defense and the burden of proof.

1. Problem background and typical scenarios

In contracts such as sales, contracting, and construction projects, it is often agreed that "delivery first, payment later", "payment first, delivery later", or performance in stages. When the party with the obligation to perform first fails to perform or performs unsatisfactorily, the party with the obligation to perform later may wish to refuse to perform on this basis, but is concerned about being accused of breaching the contract. Some parties also confuse the defenses of simultaneous performance, prior performance, and unconscientious performance, resulting in improper claims. The application prerequisites of the three defenses are different. In particular, the right of prior performance is based on "the order of performance". Only by understanding the conditions and limits can we exercise it correctly and avoid risks.

II. Key points of contention

The controversy focuses on four aspects: first, the applicable conditions, whether the parties owe debts to each other and whether there is an order of performance; second, the scope and limits of the defense, whether it is possible to refuse to perform in full or only to refuse to perform the corresponding part; third, the distinction from other defenses, the applicable prerequisites of the defense of performance first, the defense of simultaneous performance, and the defense of uneasiness; fourth, the way of exercising and the provision of evidence, how to prove the order of performance and the other party's failure to perform or perform in a manner inconsistent with the agreement. In practice, the court usually first confirms the order of performance, and then examines whether the party performing first has failed to perform or performed in a manner inconsistent with the agreement.

III. Professional analysis by Henglue Lawyers

The first layer concerns the conditions of mutual debts and the order of performance. The right of first-performance defense requires that both parties owe mutual debts, and the contract or law stipulates the order of performance; if there is no order of performance, the right of simultaneous performance defense shall apply instead of the right of first-performance defense. The second layer concerns the conditions of the first-performance party's failure to perform or its non-compliant performance. If the party required to perform first fails to perform at all, the other party has the right to refuse its performance request; if the first-performance party's performance is non-compliant, the other party only has the right to refuse its "corresponding" performance request, that is, the defense should be commensurate with the degree of defects in the other party's performance and cannot refuse the entire performance on the grounds of minor defects. The third layer concerns the nature and effect of the defense. The exercise of the right of first-performance defense by the other party is a legitimate exercise of rights and does not constitute a breach of contract or entail liability for delay; after the first-performance party rectifies its performance, the other party should resume performance accordingly. The fourth layer concerns the distinction from the right of simultaneous performance defense and the right of uncertainty defense. The right of simultaneous performance defense applies to situations without a sequence of performance and requiring simultaneous performance; the right of uncertainty defense applies to situations where the first-performance party has concrete evidence to prove that the other party may lose its ability to perform, focusing on the "first-performance party's" self-protection, while the right of first-performance defense focuses on the "other party's" resistance to the first-performance party's non-performance. The fifth layer concerns the exercise method and evidence. The other party should explicitly raise the defense upon receiving the performance request or provide written reasons for refusal; the evidence should prove the agreed order of performance and the fact that the first-performance party failed to perform or performed non-compliantly. In practice, it is recommended to retain contract clauses, correspondence letters, and acceptance records to clearly reconstruct the order of performance and the degree of defects. When handling contract disputes, our firm typically organizes evidence around the order of performance, the other party's performance, and the limits of the defense to help clients properly exercise their rights of defense and respond to breach of contract allegations.

IV. Practical suggestions and legal basis

First, review whether the contract stipulates the order of performance and the content of the parties' obligations. Second, confirm whether the party performing first has failed to perform or performed in a manner inconsistent with the contract, and collect corresponding evidence. Third, when receiving a request for performance, clearly raise a defense and provide written reasons, and the scope of the defense should be commensurate with the defects of the other party. Fourth, after the party performing first makes corrections, it shall resume performance in a timely manner; if the other party refuses to make corrections, it may claim breach of contract liability or rescind the contract according to law. Main legal basis: Article 225 of the Civil Code of the People's Republic of China (Right of Defense against Simultaneous Performance), Article 226 (Right of Defense against Prior Performance), Article 227 (Right of Defense against Uncertainty), Article 77 (Liability for Breach of Contract); The above provisions shall come into effect on January 1, 2021. The specific application shall be subject to the currently effective provisions.

5. Henglue Law Firm's Reminder

Three sentences on the right of first performance: There is a right of first performance only when there is a specific order; for those without a specific order, the right of simultaneous performance shall be used; if the party performing first fails to perform its obligations, the other party may refuse its request; if the performance is not up to standard, the other party may only refuse the corresponding part; when raising a defense, evidence and written notice must be provided, and the performance shall be resumed promptly after the correction. For matters related to contracts and corporate affairs, you can seek assistance through legal channels.Business and contract disputes in enterprisesWe provide a comprehensive solution for services, which can be integrated with engineering and real estate transactionsReal estate transactions and construction projectsFor reference, you can check the sections related to debt recovery and enforcementDebt recovery and enforcementFor columns, if you have any questions about difficult commercial disputes, you can consult usSpecial servicesTeam.

VI. Frequently Asked Questions

Q1: What are the conditions for the application of the right of first performance defense?

The two parties have mutual obligations, and the contract or law stipulates the order of performance. However, the party that should perform first fails to perform or performs in a manner that does not comply with the agreement, and the party that should perform later refuses to fulfill its performance request on this basis.

Q2: What evidence do I need to prepare to exercise the right of defense of prior performance?

The contractual provisions stipulating the order of performance, evidence showing that the party performing first failed to perform or performed in a manner inconsistent with the agreement (such as acceptance records and correspondence), and written notifications and delivery receipts for raising defenses.

Q3: Are the costs of such disputes high?

For cases with clear facts, the cost is manageable, and the fees are charged according to the amount of the claim. Clients can negotiate with lawyers to make payments in stages, and the specific payment terms shall be subject to the provisions of the contract of engagement.

Q4: How long will it take to process it?

The process of negotiation and rectification is usually completed relatively quickly. For cases that proceed to litigation, the first-instance trial is generally concluded within a few months. However, the duration of the trial may be extended if there are disputes over the order of performance or the degree of defects, and the actual duration will depend on the court's scheduling.

Q5: The other party was just one step away from fulfilling their obligation. Can I reject all of their requests?

Generally, this is not allowed. If the party who performs first fails to perform in accordance with the contract, the party who performs later can only refuse to accept the performance corresponding to the defects. Refusing to accept the entire performance due to minor defects may be deemed inappropriate.

The above answer is based on the judicial practice in the Beijing area. The judicial interpretations in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in time.