[Direct answer]In the Beijing area, the breaching party generally does not enjoy the statutory right of rescission, and only the performing party may rescind the contract in accordance with Article 563 of the Civil Code of the People's Republic of China; but according to Article 580 Paragraph 2, if the non-pecuniary obligation encounters statutory exceptions such as the inability to perform, which results in the failure to achieve the contractual purpose, the breaching party may request the people's court or arbitration institution to terminate the contractual rights and obligations, but this does not affect the breaching party's obligation to bear the liability for breach of contract. Whether the request can be supported depends on whether it meets the strict conditions of "inability to perform and failure to achieve the contractual purpose", rather than the breaching party's unilateral notice being sufficient to rescind the contract. It is recommended to consult a professional lawyer about the specific performance obstacles. For more details, please refer to the following link:Business and contract dispute resolution services for enterprises.

1. Problem background and typical scenarios

In practice, it's not uncommon for the breaching party to actively want to "get rid of" the contract. Typical scenarios include: the lessee encountering operational difficulties and wanting to terminate the lease early, suing to request the termination of the lease; the buyer not wanting to continue performance due to market changes and requesting confirmation of the termination of the contract; the developer's capital chain being disrupted and unable to deliver the house, requesting the termination of the pre-sale contract; and the cooperating party being unable to perform due to policy or qualification reasons and hoping to terminate the contract through judicial means. In these situations, the breaching party often hopes to "legally get out of the contract" through litigation, but unilateral termination is not necessarily effective, and may even result in heavier responsibilities. Relevant contract disputes can be resolved in accordance with the relevant provisions of the Civil Code and other laws and regulations.Business and contract dispute services for enterprisesEvaluation.

II. Key points of contention

There are three key points of the dispute raised by the breaching party. Firstly, the subject of the right of rescission: The right of rescission legally belongs to the performing party, and the breaching party generally cannot rescind the contract unilaterally. Secondly, the application threshold of Article 580 Paragraph 2: It must be a non-monetary obligation, and there must be exceptional circumstances stipulated in the article (such as being legally or factually unable to perform, the subject matter being unsuitable for forced performance, or the performance cost being too high), and it must result in the inability to achieve the contractual purpose, before the breaching party can request judicial termination. Thirdly, the liability is not exempted: Even if the contract is terminated, the breaching party is still obliged to bear breach of contract liabilities such as compensation for losses. For disputes involving the validity of the contract, reference can be made to the relevant provisions of the Contract Law of the People's Republic of China.Special services and other case-related services.

III. Professional analysis by Hengluo Lawyers

Based on an arbitration case of a commissioned creation contract dispute handled by our firm, we can clarify the legal consequences of the breaching party's "rescission". On May 12, 2022, Shanghai A Technology Company and Shenzhen B Network Company signed the "Project Outsourcing Agreement", which stipulated the production of G virtual IP materials for upgrading, with a total cost of 583,000 yuan. After the work was finalized on July 16, 2022, and passed the acceptance on July 20, 2022, B Company, as the respondent, unilaterally notified the rescission of the agreement on October 25, 2022, and delayed the payment of the remaining funds. A Company entrusted Attorney Xiong Binrong of Beijing Henglu Law Firm to apply for arbitration, requesting the confirmation of the rescission, the payment of the contract amount of 583,000 yuan, the breach of contract penalty of 116,600 yuan, as well as attorney fees and arbitration fees.

The core issue reviewed by the arbitration tribunal was whether Company B could unilaterally terminate the contract and refuse to pay all fees on the grounds of "non-compliance with quality standards". After analyzing the contract terms and WeChat evidence, Henglu Law Firm proved that every step of the work had been confirmed by Company B, that the delay was caused by its 30% modification, and that the product had passed the acceptance test. Company B's "termination" lacked contractual and legal basis and could not exempt it from its payment obligation. In the end, the arbitration tribunal adopted the main opinion and ruled that Company B should pay 583,000 yuan in contractual fees and compensate for all legal fees. This case shows that the breaching party's unilateral notice of termination is not necessarily valid. If it does not meet the statutory conditions for termination, it should instead continue to perform the contract or bear breach of contract liability.

This case is handled by Beijing Henglu 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

The legal basis is Article 580 of the Civil Code of the People's Republic of China (effective January 1, 2021) (excluding cases of non-monetary debt performance and the second paragraph on the breaching party's right to terminate the request), Article 563 (the statutory right to rescind the contract), Article 566 (the consequences of rescinding the contract), and Article 584 (damages for breach of contract). Practical advice: Before the breaching party intends to rescind the contract, it should first determine whether it falls into the strict circumstances of Article 580, paragraph 2, and should not simply notify the other party and dismiss the matter. The breached party, when encountering the other party's unilateral "rescission", should fix the evidence of its breach of contract and claim for continued performance or compensation. Regardless of which party, it should confirm through judicial procedures within the statute of limitations to avoid being passive due to self-disposition. In cases involving litigation, it can be combined with other relevant provisions to ensure the protection of the parties' legitimate rights and interests.Business and contract dispute resolution services for enterprisesAdvance.

5. Hengluo Law Firm's Advice

The breaching party should not mistakenly believe that "the receipt of the notice constitutes a termination". Firstly, it is necessary to review whether the breaching party meets the conditions of performance failure and the failure of the contractual purpose set forth in Article 580, Paragraph 2; Secondly, it is necessary to estimate the liability for compensation after the termination, and the breaching party will not be exempted from liability even if it terminates the contract; Thirdly, it is necessary to prioritize negotiating amendments or terminations and confirming them in writing to reduce the cost of litigation; Fourthly, if judicial termination is necessary, it is necessary to prepare evidence of performance obstacles. The performing party should be vigilant against the other party's "pretend to terminate but actually evade liability", and promptly fix evidence and assert rights. If litigation is necessary, it can be assisted by legal professionals.Special services and other case-related servicesDevelop a plan.

VI. Frequently Asked Questions

Q1: I am the breaching party. Can I win if I initiate a lawsuit to terminate the contract?

Whether or not support can be obtained depends on whether it meets the strict statutory conditions, rather than the outcome commitment. According to Article 580 Paragraph 2 of the Civil Code, only when there are exceptional circumstances such as the inability to perform non-monetary obligations and the failure to achieve the purpose of the contract, can the breaching party's request for judicial termination be supported; ordinary market changes and commercial risks do not constitute grounds for termination. If you simply do not want to perform the contract and the subject matter can be enforced, the court will usually not support the breaching party's termination, but may instead order continued performance or compensation. It is recommended to first assess the nature of the performance obstacles, and if necessary, entrust a lawyer to provide a feasibility analysis. Do not easily believe in unrealistic promises of "getting out of trouble".

Q2: If the breaching party sues to terminate the contract, what evidence do I need to prepare?

The core evidence includes: the original contract and materials on its performance (proving the nature of the contract and the progress of its performance), evidence of performance obstacles (such as de facto inability to perform, legal prohibitions, appraisals or documentary evidence showing excessive performance costs), evidence of the failure of the contract's purpose (such as the loss of the subject matter, policy changes, or the other party's lack of intention to accept performance), records of notifying the other party and conducting negotiations, and preliminary materials on the breaching party's losses. The evidence should be organized around "non-monetary obligations + inability to perform + failure of purpose". If materials are missing, the party may apply for appraisal or request their retrieval. It is strictly prohibited to initiate litigation solely based on oral reasons.

Q3: If the defaulting party sues to terminate the contract, how much will the attorney's fees and litigation costs be?

The litigation fees shall be calculated in accordance with the "Measures for the Payment of Litigation Costs" based on the amount of the litigation request, with the losing party bearing the fees and the parties sharing the fees proportionally if there is partial victory or defeat; if the request is to terminate the contract and involves the subject matter, the fees shall be calculated based on the subject matter. The attorney's fees shall be determined based on the complexity of the case, the amount of the subject matter, and the workload, and shall be calculated on a per-case, hourly, or percentage basis of the subject matter, subject to the specific provisions of the entrustment contract, with no unified government pricing. It is recommended to estimate the compensation risk after the termination of the contract before suing, compare it with the litigation fees and attorney's fees, and avoid "losing more after terminating the contract". For cases with clear facts, priority should be given to negotiation to keep the cost within a reasonable range.

Q4: How long does it usually take for the party in breach of contract to sue for rescission and for the case to reach a conclusion?

The first-instance ordinary procedure is concluded within six months, and the simplified procedure within three months; cases involving appraisal of performance obstacles or complex subject matters may take longer. If there is an appeal, the second-instance procedure generally lasts three months. After the judgment takes effect, the enforcement phase begins, and the time required for repayment or performance depends on the specific circumstances. Overall, such cases often take several months to half a year from filing to adjudication, and complex cases may take even longer. It is recommended to fix evidence and evaluate the possibility of mediation during the litigation process, and to apply for property preservation when necessary to shorten the dispute resolution cycle.

Q5: As the party in breach of contract, I want to terminate the contract. What should I do first?

It is recommended to proceed in four steps: First, review whether the contract meets the termination conditions stipulated in Article 580 Paragraph 2, such as the inability to perform, and determine whether there is a possibility of judicial termination; Second, sort out the evidence of performance obstacles and clues indicating the failure to achieve the contractual purpose, and prepare written materials; Third, first consult with the contract-abiding party on amendments, termination, or discounted settlement to strive for a written agreement to reduce legal disputes; Fourth, if no agreement is reached and the conditions are met, file a lawsuit for judicial termination within the statute of limitations, and prepare a plan to assume liability for compensation. Throughout the process, keep communication records and, if necessary, hire a lawyer to assess the chances of success and the costs involved.

The above Q&A is mainly based on judicial practice in the Beijing area. There may be differences in the adjudication guidelines in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

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·Attorney Xiong Binrong·Beijing Hengluo Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available adjudication rules, and is provided 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 a timely manner.