[Direct answer]In the Beijing area, the conclusion is that it is possible, but subject to meeting statutory or contractual conditions. According to Article 634 of the Civil Code of the People's Republic of China, if the buyer under an installment payment agreement fails to pay the amount of the overdue price that reaches one-fifth of the total price, and still fails to pay the overdue price within a reasonable period after being reminded, the seller may request the buyer to pay the full price or rescind the contract; if the seller rescinds the contract, the seller may request the buyer to pay the use fee of the subject matter. If the contract stipulates other conditions for rescission, such conditions shall prevail. When claiming rescission, the seller should fix the evidence of the reminder and the arrears, specify the amount and proportion of the arrears, and assert rights through legal means to avoid recovering the subject matter by improper means or disposing of it on their own. Whether it constitutes a fundamental breach of contract and whether it can be directly rescinded shall be judged comprehensively based on the proportion of the arrears, the situation of the reminder, and the contractual provisions.

I. Problem background and typical scenarios

Installment payments are commonly used in large-scale transactions such as equipment sales and vehicle transactions. Buyers' overdue payments are the most concerned repayment risks for sellers. Typical situations include: buyers failing to make payments for several consecutive periods, with the proportion of arrears continuing to rise; sellers claiming to terminate the contract and recover losses after repeated reminders without success; buyers claiming financial difficulties and requesting extensions; and disputes arising over the return and settlement of the subject matter after it has been used or resold. When the Beijing district court handles such cases, it usually reviews whether the proportion of arrears meets the statutory standards, whether the seller has fulfilled the obligation of reminding, and the contractual provisions on termination and penalties, and determines the remedial measures accordingly.

II. Key points of dispute

Firstly, whether the outstanding debt reaches the standard of one-fifth of the total price. Secondly, how to determine the form of the reminder and a reasonable time limit. Thirdly, how to choose between rescinding the contract and requesting full payment of the price. Fourthly, whether the conditions for rescinding the contract stipulated in the contract are valid. Fifthly, how to settle the usage fees of the subject matter and the paid price. Sixthly, how to handle the subject matter that has been used or resold. Seventhly, the relationship between the breach of contract penalty and the compensation for losses. These issues determine the seller's remedial path and effectiveness.

III. Professional analysis by Henglue Law Firm

A contract dispute over commissioned creative work handled by Henglue Law Firm is of reference value. In May 2022, Shanghai A Technology Company and Shenzhen B Network Company signed a "Project Outsourcing Agreement", agreeing to upgrade the virtual image materials at a cost of 583,000 yuan. After the work was inspected and approved in July 2022, the respondent delayed paying the remaining balance for a long time. Due to failed negotiations, A Company entrusted Henglue Law Firm to apply for arbitration, requesting the termination of the agreement, payment of the contract amount of 583,000 yuan, and compensation for breach of contract, attorney fees, and arbitration fees. The lawyer analyzed the contract terms item by item and combined with evidence such as WeChat chats and inspection records to demonstrate that the work had been delivered as agreed and confirmed, and the delay was caused by the other party. The arbitration tribunal adopted the lawyer's main arguments and ruled that the respondent should pay the contract amount of 583,000 yuan and compensate for all attorney fees. This case shows that when one party persistently defaults on payments, the contract-abiding party should fix the delivery and inspection evidence as soon as possible and claim termination or payment and legal protection fees in accordance with the contract. Returning to the issue of installment payments, Henglue Law Firm's practical experience is: first, calculate whether the proportion of arrears reaches one-fifth and determine whether it can be directly terminated; second, send a written notice of default and grant a reasonable time limit before termination, and keep the evidence of delivery; third, weigh the advantages of termination and claiming the full price and choose the path that is more conducive to recovering the payment; fourth, claims for royalties and losses must be supported by evidence; fifth, apply for property preservation in litigation to prevent the other party from transferring assets. This case was handled by Beijing Henglue Law Firm.Xiong BinrongThe attorney (practice license number: 11101202211410897, subject to the document issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

Practical suggestions: First, calculate the amount of the buyer's debt and its proportion of the total price to determine whether it meets the conditions for rescission; Second, send a written notice of default and set a reasonable time limit before rescission, and keep evidence of delivery and communication; Third, weigh the two options of rescinding the contract and requesting full payment, and choose the most advantageous one; Fourth, prepare corresponding evidence when claiming royalties, liquidated damages, and compensation for losses; Fifth, if the subject matter is involved, apply for property preservation in time to prevent it from being transferred or disposed of; Sixth, the contract should stipulate the conditions for rescission, liquidated damages, and dispute resolution methods. For more details, please refer to the platform's services.Business and contract disputes in enterprises、Creditor's rights and debts, and enforcement,Property transactions and construction projects,\nFinancial capital and cross-border transactions involving foreign entitiesAndSpecial servicesLegal basis: Articles 563, 577, and 634 of the Civil Code of the People's Republic of China (all of which came into effect on January 1, 2021). The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglue Law Firm's Advice

Firstly, if the buyer of the installment payment owes one-fifth of the total price and fails to pay after being reminded, the seller may request the full payment or rescind the contract. Secondly, before rescinding the contract, the seller shall give written notice and set a reasonable time limit, and keep the evidence. Thirdly, the seller may choose between rescinding the contract and requesting the full payment, and should consider the possibility of recovering the payment when making the choice. Fourthly, after rescinding the contract, the seller may claim both the usage fees and the losses of the subject matter. Fifthly, if the subject matter is easily transferable, the seller should apply for property preservation in time. Sixthly, the contract should clearly specify the conditions for rescinding the contract and the penalty for breach of contract to reduce disputes. Seventhly, if the amount involved is large or the other party refuses to cooperate, it is advisable to consult a professional lawyer as soon as possible.

VI. Frequently Asked Questions

Q1: How much do I have to owe in installment payments to terminate the contract?

According to Article 634 of the Civil Code of the People's Republic of China, if the amount of the overdue payment reaches one-fifth of the total price and the buyer still fails to make the payment within a reasonable period after being reminded, the seller may request the buyer to pay the full price or rescind the contract. Where the contract stipulates otherwise, the provisions of the contract shall prevail. When claiming the payment, the seller shall provide evidence of the outstanding debt and the reminder.

Q2: If the buyer owes money but the amount is less than one-fifth of the total, what should they do?

The seller may claim breach of contract liability. When the amount of the outstanding debt does not reach the statutory proportion, the seller may require the buyer to pay the due price and bear the liability for breach of contract due to overdue payment, or terminate the contract if the conditions stipulated in the contract are met. It is recommended to send a written reminder first, clarify the amount of the outstanding debt and the deadline, keep the communication records, and prepare evidence for subsequent claims or litigation.

Q3: Can I still claim the breach of contract penalty after terminating the contract?

This can be claimed, but it requires evidence. If the contract stipulates a penalty for breach of contract, it can be claimed according to the contract; if there is no stipulation, actual loss compensation can be claimed; after the contract is terminated, the seller can also request the buyer to pay the use fee of the subject matter. If the penalty for breach of contract is obviously higher than the loss, the other party can request an adjustment. When claiming, the seller should prepare corresponding evidence of the loss and the use fee.

Q4: What should the buyer do if they sell the equipment?

You should assert your rights in a timely manner. If the subject matter has been resold, you can claim corresponding responsibilities according to the agreement on retention of ownership or the contract terms, and apply for property preservation as soon as possible to prevent the transfer of property. For the subject matter obtained by bona fide third parties, it is usually difficult to recover the subject matter, but you can claim the price and compensation from the buyer, and if necessary, resolve the matter through litigation.

Q5: Are there any time limits for issuing a notice of default?

A reasonable timeframe must be granted. The reminder shall be made in writing and the evidence of delivery shall be preserved. The length of the timeframe shall be determined in accordance with the transaction practices and the nature of the subject matter, and it shall generally allow the buyer a reasonable opportunity to perform. If the buyer still fails to make the payment after the expiration of the reminder period, the seller may, in accordance with the contract, claim the right to rescind the contract or request the full payment. The appropriateness of the procedure will affect the effectiveness of the claim.

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

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

Disclaimer: This article is compiled based on the current effective laws and regulations and open 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 you encounter disputes, please consult a practicing lawyer in time.