[Direct answer]In the Beijing area, using other goods to settle debts legally falls under the category of "settling debts with goods" (subrogation). According to Article 27 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the General Provisions of the Contract Chapter of the Civil Code of the People's Republic of China" (effective from December 5, 2023), if an agreement on settling debts with goods is reached after the expiration of the debt performance period and there are no circumstances affecting the validity of the contract, the agreement shall take effect upon its establishment; if the debtor settles the debt with goods after performance, the original debt shall be extinguished simultaneously. In other words, if the goods used to settle the debt have been delivered as agreed and the ownership has been transferred, the original debt shall be deemed to have been fully paid off. However, if an agreement is made before the expiration of the performance period that the goods used to settle the debt shall belong to the creditor if the debt is not paid off by the due date, such an agreement shall be invalid according to Article 28. For more details, please refer to the official document.Business and contract dispute resolution services for enterprises.

I. Problem Background and Typical Scenarios

When debtors temporarily lack cash and use inventory, equipment, or other goods as payment, this is a common "alternative settlement" method in commercial practice. Typical scenarios include: when buyers are unable to pay in cash and propose to offset the debt with equivalent goods; when enterprises owe each other and negotiate to use their own products to settle the debt; when debtors use second-hand equipment or raw materials to offset project payments; and when the agreed upon offsetting goods do not match the original subject matter of the debt, and creditors worry that "the offsetting will not count". Many creditors are confused: if they accept goods from other companies, will the original monetary debt be written off? The answer depends on the validity of the agreement on offsetting debts with goods and whether it has been actually implemented. For cases involving project payments and movable property offsetting, it can be combined withReal estate sales and construction project servicesCoordination.

II. Key points of contention

The focus of the dispute centers on three points. Firstly, the establishment time and effectiveness of the agreement: an agreement to settle a debt with property concluded after the expiration of the contract generally takes effect upon its establishment, while those concluded before the expiration of the contract need to be evaluated in light of the creditor-debtor relationship. The clauses of "if the debt is not repaid by the due date, the property shall belong to the creditor" in the flow pledge and flow quality agreements are invalid. Secondly, whether the agreement has been actually performed: if only the agreement is signed but the property is not delivered or transferred, the original debt is usually not extinguished, and the creditor can still claim the original creditor's rights. Thirdly, the value and defects of the property used to settle the debt: if the value of the property used to settle the debt is significantly insufficient or there are rights defects, it may affect the determination of repayment and subsequent recovery of debts. When handling similar cases in Beijing, the court often distinguishes between agreements to settle debts with property and assignment guarantees to prevent false settlement of debts harming other creditors. In cases involving multiple creditors, reference can be made to the relevant provisions.Creditor-debtor relations and enforcement case services.

III. Professional analysis by Hengluo Lawyers

Based on the practical experience of our firm in handling contract and debt settlement disputes, the most common problems with debt settlement by goods are "signing without delivery" and "delivering with defects". Hengluo Lawyers usually advise that if the debt has reached the settlement period, the parties should sign a written debt settlement agreement, clarifying the debt settlement items, quantity, quality, valuation, and delivery and transfer methods, and complete the delivery or ownership transfer as soon as possible to eliminate the original debt simultaneously. It is crucial to avoid signing the agreement but failing to fulfill the obligations, otherwise the creditor will still hold the original creditor's rights. For clauses stipulating that "if the debt is not paid by the due date, it will belong to you", lawyers will point out that it may be invalid due to the rules on floating pledges and floating mortgages, and should be modified to a legal expression that allows compensation through discounting, auction, or sale after the due date. In practice, lawyers will also review whether the debt settlement by goods harms the interests of other creditors and avoid having the transaction revoked. For debt settlement involving intellectual property contributions, lawyers can provide corresponding advice based on the specific circumstances.Intellectual property protection and corporate legal servicesEvaluate the ownership rights.

IV. Practical Suggestions and Legal Basis

The core basis is the General Provisions on Payment and Contract Effectiveness in the Civil Code of the People's Republic of China (implemented on January 1, 2021), as well as Article 27 (the effectiveness of agreements on offsetting debts with property after the expiration of the term and the extinction of the original debt) and Article 28 (the invalidity rules for agreements on offsetting debts with property and the stipulations on pledging and mortgaging before the expiration of the term) of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of the General Provisions on Contracts in the Civil Code of the People's Republic of China (Fa Shi [2023] No. 13, implemented on December 5, 2023); for matters involving changes in property rights, reference should be made to the provisions on delivery and registration in the Property Law. Practical suggestions: Confirm that the debt has matured before signing an agreement on offsetting debts; specify in writing the offsetting property, its valuation, and the delivery and transfer methods; complete the delivery or ownership transfer in a timely manner; avoid making statements about pledging and mortgaging before the debt maturity; and retain valuation and handover certificates. For cross-border debt offsetting, relevant provisions may be consulted.Financial capital and cross-border services involving foreign affairsAnalysis and judgment.

5. Henglu Law Firm's Reminder

Offsetting debts with assets is not as simple as "signing a note and settling the matter". The key lies in the effectiveness of the agreement and its actual implementation. If the assets have not been delivered or transferred, the original debt is likely to remain outstanding; if it is agreed that "if the debt is not paid by the due date, the assets will belong to you", it may instead fail due to the invalidity of the agreement. It is recommended to clearly specify the valuation, delivery, ownership transfer, and warranty of defects, and to prevent the risk of the transaction being revoked due to harming other creditors. After receiving the assets used to offset the debt, the owner and quality of the assets should be verified in a timely manner to avoid "getting rid of one problem only to create new ones". If necessary, professional assistance can be sought to ensure the transaction's legitimacy and effectiveness.Special services and other case servicesIn case of complex situations, please consult a practicing lawyer as soon as possible and do not use templates indiscriminately.

VI. Frequently Asked Questions

Q1: If I accept the other party's goods as a form of debt repayment, does that really mean the original debt is cleared?

It is allowed under legal conditions. According to Article 27 of the Judicial Interpretation of the General Provisions of the Contract Law, the agreement to settle the debt with property reached after the expiration of the debt performance period shall take effect upon its conclusion; after the debtor performs the obligation in accordance with the agreement, the corresponding original debt shall be extinguished simultaneously. However, two conditions must be met: first, the debt has reached the repayment period and the agreement is valid; second, the property used to settle the debt has been actually delivered or the ownership transfer has been completed. If only an agreement is signed but the property is not delivered or the ownership transfer is not completed, the original creditor's rights are usually not extinguished, and you can still claim the original debt. In practice, the delivery and transfer certificates are decisive evidence of "clearing the debt", so don't give up the original creditor's rights just based on a piece of paper agreement.

Q2: When signing an agreement to settle debts with goods, what do I need to prepare and review?

The core includes: the original creditor-debtor documents (contracts, bank statements, IOUs); evidence confirming that the debt has reached the repayment period; a written agreement on debt settlement with clear descriptions of the name, quantity, quality, valuation method, and delivery and transfer methods of the debt-settling assets; proof of the debt-settling assets' clear ownership and free from mortgage or seizure; handover and acceptance records; and valuation basis. The focus is on reviewing whether the agreement has conditional effectiveness, whether it involves invalid clauses on mortgage or pledge, and whether it may harm other creditors. The more complete the materials are, the more stable the subsequent repayment determination will be, and it will also be easier to resist third-party objections.

Q3: What are the approximate costs of appraisal and transfer of ownership involved in settling debts with assets?

The fees vary greatly depending on the nature of the debt repayment: goods may require appraisal, storage, and transportation costs; real estate and equity involve registration, stamp duty, and agency fees; professional appraisals are charged based on the value of the subject matter or a fixed amount, with no nationwide standard pricing. From a legal perspective, the agreement fees for debt repayment by goods are generally negotiated between the parties, and third-party fees are shared according to the agreement or legal provisions. It is recommended to specify in the agreement who will bear the various fees, the valuation basis, and the dispute resolution mechanism, so as to avoid disputes over fees at the time of delivery and to facilitate the calculation of whether the debt repayment fully covers the original debt.

Q4: How long does it usually take from signing the debt repayment agreement to the original debt being extinguished?

If the debt has matured and the agreement is valid, the original debt will be extinguished upon the actual delivery of the offsetting property or the completion of the transfer of ownership. The timing depends on the speed of performance: simple goods delivery may be completed within a few days, while the transfer of real estate or equity often takes several weeks to months. If only the contract is signed but the delivery is not made, the original debt will never be extinguished, and there will be no "automatic clearing at the expiration of the time limit". If it involves appraisal, registration, or the lifting of a seizure, the period will be correspondingly extended. It is recommended to include the delivery and transfer node in the agreement and set default clauses to urge the other party to perform its obligations in a timely manner.

Q5: I want to settle my debt by using goods as payment. What should I do first?

It is recommended to proceed in four steps: First, confirm that the original debt has reached the repayment period and check the amount, obtaining documents such as a statement of account; Second, sign a written agreement with the creditor to offset the debt with property, clarifying the offsetting property, valuation, delivery and transfer methods, and cost sharing to avoid invalid expressions such as floating pledges and floating mortgages; Third, complete the delivery or ownership transfer as soon as possible, obtaining handover and transfer certificates to eliminate the original debt simultaneously; Fourth, claim set-off against the creditor's debts in accordance with the law and prevent the debt from being revoked due to harming other creditors. For reference, please refer to the following content:The official website of Beijing Hengluo Law FirmFor further guidance, you may consult a lawyer to review the agreement and the execution process if necessary.

The above answer is based on the judicial practice in the Beijing area. The judicial interpretation 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. →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. If a dispute arises, please consult a practicing lawyer in time.