[Direct answer]In the Beijing area, the simultaneous exercise of the right of defense is a right of defense in a bilateral contract stipulated in Article 525 of the Civil Code of the People's Republic of China. Where the parties have mutual debts and there is no order of performance, they shall perform simultaneously; if one party has the right to refuse the other party's performance request before the other party performs, and the other party's performance of the debt does not conform to the agreement, it may refuse the corresponding performance request. Its establishment requires that the debts of both parties be based on the same bilateral contract, have reached the performance period, have a quid pro quo relationship, and the other party has not performed or performed defectively. In practice, it is commonly seen in disputes over reciprocal performance such as sales, leasing, and contracting. To claim this right, it is necessary to prove that the party has performed or is preparing to perform, and that the other party's failure to perform constitutes a breach of contract. It is also necessary to strictly observe the proportion of reciprocal performance and not to abuse it. It is recommended to clarify the order and nodes of performance when signing the contract, and to fix the evidence of the other party's failure to perform in time after the dispute arises. For more details, please refer to the following link:Legal services for corporate commercial and contract disputes.

I. Problem Background and Typical Scenarios

At the same time, the right of set-off is mostly used in scenarios of bilateral contracts such as sales, leasing, and contracting. Typical cases include: the buyer refuses to pay the goods after receiving them on the grounds that the seller has not issued an invoice; in the case of housing leasing, both parties accuse each other of breaching the contract first and refuse to continue the performance; in the contracting contract, the employer claims that the work results are defective and refuses to pay the remuneration, while the contractor claims that the work has been completed and requests the payment of the remuneration. Many parties mistakenly believe that "if the other party doesn't pay me, I can naturally not pay either", ignoring the fact that the right of set-off is based on mutual debts and the performance of the counter-performance. This right is a defense in performance, which can only temporarily refuse to perform, but does not extinguish the other party's creditor's rights or exempt oneself from obligations. Related performance disputes can be resolved in combination withCreditor-debtor relations and enforcement case servicesEvaluate them together.

II. Key points of dispute

The focus of the dispute centers on three points. Firstly, the prerequisites for the establishment of the right of defense: whether the debts of both parties originate from the same bilateral contract, whether they have all reached the repayment period, and whether there is a quid pro quo relationship. This is the first step of the court's review. Secondly, the scope of exercise: when the other party only partially fulfills its obligations, the scope of refusal to perform should be commensurate with the degree of its defects, and it shall not refuse to perform all the obligations on the pretext of the defects. Otherwise, it may constitute a breach of contract itself. Thirdly, the burden of proof: the claimant must prove that it has performed or is ready to perform, and that the other party has not performed or performed with defects. For cases involving the joint performance of engineering and sales, reference can be made to the relevant provisions.Real estate sales and construction project servicesClarify the performance deadlines and corresponding obligations at each stage.

III. Professional analysis by Henglue Lawyers

Based on practical observations in handling disputes over bilateral contracts, the right of defense of simultaneous performance is most likely to be misused by parties. Many people still refuse to pay on the grounds of "simultaneous performance" when the other party has partially performed or the party itself has breached the contract first, which ultimately makes it difficult to obtain support. According to Article 525 of the Civil Code, the right of defense requires that "the parties owe each other debts, there is no order of performance, and the other party has not performed". When exercising this right, the proportion of payments should be strictly controlled to avoid "using refusal to pay to counteract refusal to pay" and falling into a breach of contract by both parties. Henglue Lawyers usually suggest: First, fully sort out the contract performance sequence and the evidence of performance to determine whether the party has the prerequisites for exercising the right of defense. Then, clearly assert the right of defense in a written letter and fix the facts of the other party's breach of contract to prevent being counter-sued for delay in performance or bearing breach of contract liability. For enterprises' daily contract management, it can be followed up accordingly.Intellectual property protection and corporate legal servicesImprove the design of the clauses.

IV. Practical suggestions and legal basis

The legal basis is Article 525 of the Civil Code of the People's Republic of China (effective January 1, 2021) (the right of defense against simultaneous performance), Article 526 (the right of defense against advance performance), Article 527 and Article 528 (the right of defense against uncertainty), as well as relevant provisions on contract performance and breach of contract liability. Practical suggestions: When signing the contract, clarify the order of performance, time limit, and consideration of payment; during the performance process, keep delivery, acceptance, and payment receipts; if the other party fails to perform, first send a written reminder and assert the right of defense to avoid directly suspending payment and constituting a breach of contract; if there are disputes over defective performance, promptly fix the evidence through appraisal and other means; if no agreement can be reached, initiate litigation or arbitration in accordance with the contractual dispute resolution clauses. For cross-border transactions, relevant provisions can be referred to accordingly.Financial capital and cross-border legal services involving foreign affairsEvaluate the jurisdiction and applicable laws.

5. Henglu Law Firm's Advice

At the same time, the exercise of the right of defense is a defensive right, not an excuse for refusal to pay. Before exercising this right, it is necessary to confirm three points: the debts of both parties are based on the same contract, have all matured, and the party itself has performed or is preparing to perform its obligations. The scope of refusal to perform should be commensurate with the degree of the other party's breach of contract, so as to avoid expanding the dispute and being deemed in breach of contract. It is necessary to keep records of correspondence, receipt slips, and communication records, and to assert claims within a reasonable time limit. If you are unsure about the conditions or scope of exercising this right, it is recommended to consult a professional lawyer to prevent the abuse of the right of defense from aggravating your own responsibilities. For more information on contract risk prevention, please refer to the following materials:Special services and other case services.

VI. Frequently Asked Questions

Q1: Can exercising the right of simultaneous performance necessarily allow me not to pay? Will the court support this?

This right does not necessarily lead to "non-payment". Whether the court will support it depends on whether the necessary conditions are met. If both parties have mutual debts, there is no order of performance, and you have already performed or are preparing to perform while the other party has not performed, you can usually obtain support by claiming the defense of simultaneous performance according to Article 525 of the Civil Code; if you breach the contract first, or the other party only has minor defects but you refuse to perform all of your obligations, you may be deemed to have abused the right of defense and bear breach of contract liability. In practice, judges will review the order of performance, the proportion of consideration and the completeness of evidence. Therefore, do not regard it as a universal excuse for non-payment. You should first assess whether you meet the prerequisites for exercising the defense, and if necessary, consult a lawyer to provide a professional judgment on the performance of the contract before deciding whether to claim it.

Q2: If I want to assert the right of defense of simultaneous performance, what evidence do I need to prepare?

The core evidence is organized around the "mutual debts—fulfilled or ready to be fulfilled—the other party's failure to perform or defects" framework: 1. Contract texts and supplementary agreements, which prove the parties' rights and obligations and the order of performance; 2. Evidence of our party's performance, such as delivery notes, acceptance records, payment receipts, and shipping notifications; 3. Evidence of the other party's failure to perform or defects, such as collection letters, quality objection letters, appraisal reports, and communication records; 4. Written reminders and defense notices, which prove that you have asserted your rights within a reasonable timeframe. The more evidence that can reconstruct the performance timeline, the easier it will be for your defense to be accepted. If there are missing materials, you can apply to the court for investigation and evidence collection, or require the other party to provide evidence. Never stop payments solely based on verbal claims, as this may result in you being held liable for breach of contract instead.

Q3: How much does it cost to hire a lawyer to handle this kind of contract dispute?

The fees include two parts: litigation fees and attorney fees. Litigation fees are calculated according to the amount of the litigation request in stages, as stipulated in the "Measures for the Payment of Litigation Fees", and are borne by the losing party or shared proportionally. Attorney fees are charged based on the complexity of the case, the amount of the subject matter, and the workload, either on a per-item basis, by the hour, or as a percentage of the subject matter. There is no nationwide standard pricing for these fees, and the specific charges shall be subject to the terms of the engagement contract. For some cases, risk-based attorney fees may be agreed upon, but subject to a percentage cap. It is recommended to request the law firm to provide a detailed fee breakdown before engaging their services, clarify whether it includes third-party costs such as travel and preservation fees, and compare the litigation benefits with the costs. For small-scale disputes, it is advisable to first consult with an appraiser and then decide whether to initiate litigation, to avoid incurring costs that exceed the potential benefits.

Q4: How long does it usually take to resolve a dispute involving the right of simultaneous performance of counterclaims?

The duration of the process depends on the program and the circumstances of the case. For civil litigation, the first-instance ordinary procedure generally concludes within six months, and the summary procedure within three months; for disputes over bilateral contracts with clear facts and relatively small amounts, the summary procedure or small claims litigation is often applied, with a shorter duration. If the other party appeals, the second-instance procedure generally takes three months. After the judgment takes effect, if the other party refuses to perform the obligation, it is necessary to apply for enforcement, and the time to recover the money depends on the situation of the property investigation and control. Overall, for simple cases, it may take several months from filing the lawsuit to recovering the money, and for complex cases, it may take more than a year. It is recommended to apply for property preservation simultaneously during the litigation to freeze the other party's assets, shorten the actual recovery period, and prevent the other party's performance ability from declining due to delay.

Q5: If the other party performs the contract with defects, how exactly should I exercise my right of defense?

It is recommended to proceed in four steps: First, verify the status of contract performance to determine whether there are defects in the other party's performance, whether the party has performed or is preparing to perform according to the contract, and whether the prerequisites for the defense of simultaneous performance are met. Second, send a written notice of quality objection and defense to the other party within a reasonable timeframe, clearly stating the content of the defects and refusing corresponding performance to avoid being deemed as having accepted them. Third, collect evidence of the defects, and if necessary, commission a third-party appraisal and retain all correspondence, images, and communication records. Fourth, if no agreement is reached, initiate litigation or arbitration in accordance with the contractual dispute provisions. During the trial, claim only the portion of the payment corresponding to the defects. Throughout the process, maintain all supporting documents and, if necessary, engage a lawyer to develop defense and counterclaim strategies.

The above answer is based on the judicial practice in Beijing. 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. →Corporate commercial legal services·Beijing Henglu 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 you encounter disputes, please consult a practicing lawyer in time.