[Direct answer]Yes. According to Article 564 of the Civil Code of the People's Republic of China (effective January 1, 2021), if the law or the parties have stipulated a time limit for the exercise of the right of rescission, and the parties do not exercise the right within the time limit, the right of rescission shall be extinguished; if the law does not stipulate or the parties have not agreed on a time limit, the right of rescission shall be extinguished if the right holder does not exercise the right within one year from the date when he/she knows or should know the grounds for rescission, or does not exercise the right within a reasonable period after being urged by the other party. The right of rescission belongs to a formative right, which is not subject to the suspension or interruption of the statute of limitations, but is subject to the statute of limitations. If it is not exercised within the time limit, it will be lost. Before claiming rescission, the parties should first check the time limit and exercise the right in a timely manner by giving notice. For more details, please refer to the relevant provisions.Business and contract disputes in enterprisesColumn.

1. Problem background and typical scenarios

These types of problems often arise in several situations: First, the other party in a sales or lease contract violates the contract for a long time, and the party in question hesitates and waits before deciding to terminate the contract nearly a year later. Relevant real estate lease disputes can be referred to for reference.Real estate transactions and construction projectsFirst, the contract does not stipulate the specific circumstances under which the right to rescind the contract can be exercised, and the parties do not know how to determine a reasonable time limit for rescission. Second, the contract only stipulates the circumstances of breach of contract, but does not stipulate the time limit for exercising the right to rescind the contract, and the parties are in dispute over whether the right still exists. Third, the parties hope to find another commercial solution after rescinding the contract, resulting in the expiration of the exclusionary period. Fourth, in long-term contracts such as equity and partnerships, the circumstances of breach of contract continue to occur, and it is difficult to determine the starting point. When the Beijing District Court hears the case, it usually focuses on reviewing the time point when the circumstances of rescission occur and the time when the right holder knows or should know about it.

II. Key points of contention

Focus One: The computation of the exclusion period shall start from the date when the party knows or should have known of the grounds for termination, and shall not be suspended or interrupted by negotiation or reminder. Focus Two: The reasonable period after reminder is not defined by law, and it shall be determined according to the transaction practices and the urgency of the situation, and it shall not be excessively delayed. Focus Three: The application order of the agreed period and one year shall be determined by the agreement, with the agreement taking precedence. Focus Four: The determination of the starting point when the grounds for termination continue to occur shall generally be based on a comprehensive judgment of the last known grounds for termination. Focus Five: After the right of termination expires, the remedies can still be claimed in accordance with Article 577 of the Civil Code, such as demanding performance and compensation for losses. Focus Six: The time limits for the right of revocation and the right of termination are different, and they shall be checked separately. Specifically, the current effective laws, regulations, and judicial rulings shall prevail. For the recovery of breach of contract payments, reference can be made to the relevant provisions.Creditor's rights and debts, and enforcement casesColumn.

III. Professional analysis by Henglue Lawyers

From the practical experience of the lawyers handled by our firm, the disputes over the term of the right of rescission mostly stem from three aspects: Firstly, the parties mistakenly believe that they can rescind the contract at any time, and only send a letter of rescission after the time limit has passed, only to be counterattacked by the other party with the defense of the right being extinguished; Secondly, the content of the letter of rescission is not clear. It only urges the other party to make corrections but does not state the intention of rescission. When sending the letter again, it has already exceeded one year, and the court has different opinions on the time of rescission; Thirdly, there is insufficient evidence to prove the specific time when the party knew about the grounds for rescission. The lawyers handled by our firm suggest that when discovering that the other party has fundamentally breached the contract, the first thing to do is to check whether there is an agreed time limit for exercising the right of rescission in the contract; If it is decided to rescind the contract, send a written notice stating the intention of rescission, the grounds and the basis of the clause as soon as possible and keep the proof of delivery; If it is not decided to rescind the contract for the time being, it is also necessary to evaluate the risks during the one-year period and, if necessary, send a letter first to fix the position; If there are disputes over the time of rescission, collect evidence of urging, consultation and knowing the time point in time. The key points of the relevant documents can be referred to.Special services and other casesColumn.

IV. Practical suggestions and legal basis

Action suggestions: 1. Search the contract text to confirm whether there are agreed upon deadlines and conditions for exercising the right of rescission; 2. Collect evidence of the grounds for rescission and the date of becoming aware of them, such as breach notices, reminder letters, and meeting minutes; 3. Exercise the right of rescission by giving notice within the exclusionary period. According to Article 565 of the Civil Code, the contract is rescinded when the notice reaches the other party. If the other party disputes the validity of the rescission, they can request a court or arbitration institution to confirm its effectiveness; 4. After rescinding the contract, simultaneously claim breach of contract damages and compensation for losses to avoid only rescinding the contract without seeking compensation; 5. If the deadline has passed, instead claim continued performance, adopt remedial measures, or seek compensation for losses. Legal basis: Article 564 of the Civil Code of the People's Republic of China stipulates the deadline for exercising the right of rescission; Article 565 stipulates the rescission procedure; Article 566 stipulates the settlement and breach of contract liability after rescission; and Article 577 stipulates the general form of breach of contract liability.

5. Henglu Law Firm's Reminder

Risk Alert: Firstly, the exclusion period will not be suspended or interrupted, and the right to rescind the contract will be lost after one year. Do not assume that you can rescind the contract at any time. Secondly, the notice of rescission should be clear and complete. Simply expressing dissatisfaction or urging the other party to perform does not constitute the exercise of the right to rescind the contract. Thirdly, it is advisable to make overall arrangements for the rescission of the contract and the claim for breach of contract. The timing of rescission affects the settlement and calculation of compensation. Fourthly, remaining silent for a long time after receiving the other party's urging also carries risks. If you do not express your position within a reasonable time limit, your rights will be extinguished. Fifthly, there are special rules for rescission in fields such as real estate leasing and construction projects, which should be checked separately. It is recommended to consult a lawyer before the deadline expires.Beijing Henglue Law FirmOn the official website, similar columns are subject to review by professional lawyers regarding the timing and method of exercise of rights.

VI. Frequently Asked Questions

Q1: Does the right of rescission automatically lapse if it is not exercised within one year?

This applies to situations where there are no legal provisions or agreements between the parties regarding the exercise period. According to Article 564 of the Civil Code, if the right of rescission is not exercised within one year from the date when the rescission grounds become known or should have become known to the right holder, the right of rescission shall be extinguished. If the law stipulates a time limit or the parties have agreed on a time limit, the time limit shall be implemented accordingly. The exclusionary period does not apply to the rules of suspension and interruption of the statute of limitations. Once the time limit expires, the right is lost. Therefore, after discovering the rescission grounds, the right holder should make a decision as soon as possible and send a notice of rescission.

Q2: Within what period after the other party's notice must the party exercise the right of rescission?

Article 564 of the Civil Code only stipulates that the right of rescission that is not exercised within a "reasonable period" after being urged by the other party shall be extinguished, without setting a fixed time limit. In judicial practice, the court usually judges based on the nature of the contract, the purpose of the transaction, and the urgency of the matter. Generally, it is more prudent to respond as soon as possible and clarify one's position within a few weeks. Prolonged silence may be regarded as a waiver. After receiving the notice of urgency, it is recommended to immediately check the facts and evidence, clarify in writing whether to rescind the contract or require continued performance, and keep the proof of service.

Q3: Are the time limits for the right of revocation and the right of rescission the same?

They are different. The right of rescission is subject to the one-year exclusionary period or the agreed time limit as stipulated in Article 564 of the Civil Code; the right of revocation is subject to the provisions of Article 152 of the Civil Code, which distinguishes different circumstances: the party who has made a major misunderstanding shall exercise the right of revocation within 90 days from the date when he/she knows or should have known the grounds for revocation; the party who has been coerced shall exercise the right of revocation within one year from the date when the act of coercion ceases; if the right of revocation is not exercised within five years from the date when the civil legal act occurs, the right of revocation shall be extinguished. The time limits and requirements of the two rights are different, and the claimant should verify them separately before making a claim.

Q4: Can I still hold the other party accountable for breach of contract after the right of rescission has expired?

Yes. The right to rescind the contract only affects the right to rescind the contract by notice, and does not affect the right to pursue breach of contract liability. According to Article 577 of the Civil Code, if the other party fails to perform the contractual obligations or performs them in a manner inconsistent with the agreement, the party may still request continued performance, take remedial measures, or claim damages; the claim for breach of contract penalty shall be raised separately in accordance with Article 585, and a three-year statute of limitations shall apply. If the statutory conditions are met, the party may also request the court to rescind the contract through litigation, and the court shall review whether the conditions for rescission have been satisfied.

Q5: How to properly exercise the right to rescind a contract?

According to Article 565 of the Civil Code: 1. First, confirm that the conditions for termination have been met and secure the evidence; 2. Second, send a notice of termination to the other party, stating the intention to terminate, the reasons and the legal basis. The contract will be terminated when the notice reaches the other party; 3. Third, if the other party disputes the termination, they may request a court or arbitration institution to confirm its validity, and the party initiating the termination should prepare the relevant evidence; 4. Fourth, simultaneously handle the settlement and liquidation, and claim breach of contract penalties or compensation for losses. Note that this must be completed within the exclusionary period. For more details, please refer to the relevant provisions.Business and contract disputes in enterprisesFor the column, if necessary, a lawyer will draft the termination letter to ensure the compliance with legal procedures.

The above content is based on the judicial practice in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglu Law Firm for specific cases.

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. →Business and commercial legal services·Beijing Henglu 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. In case of disputes, please consult a practicing lawyer in time.