The application of force majeure or change of circumstances rules in contract disputes in the context of the "double reduction policy" (below)-non-education and training contracts.

Published:

2022-07-21

1. issues raised The "double reduction policy" not only causes training institutions to be unable to perform education and training contracts, but also has a serious impact on other business-related contracts signed by training institutions, such as rental contracts, property contracts, labor contracts, procurement contracts, franchise contracts, etc. Whether the impact of the "double reduction policy" on the above-mentioned contractual relationship is also force majeure, or whether the rules of change of circumstances should be applied, or whether it should be a commercial risk, so how the parties to the dispute should allocate responsibility, the author tries to do the following analysis. 2. jurisprudence analysis The relevant concepts of force majeure have been analyzed in the previous article, and the following is only a discussion on whether the "double reduction policy" belongs to the "change of circumstances" practice. 1. Definition According to Article 533 of the the People's Republic of China Civil Code, the change of circumstances means that after the establishment of the contract, the basic conditions of the contract have undergone major changes that the parties cannot foresee at the time of the conclusion of the contract and are not commercial risks. If the continued performance of the contract is obviously unfair to one of the parties, the adversely affected party may renegotiate with the other party; if the negotiation fails within a reasonable period of time, the parties may request the people's court or the arbitration institution to modify or terminate the contract. The people's court or the arbitration institution shall, in light of the actual circumstances of the case, modify or rescind the contract in accordance with the principle of fairness. According to the above definition, whether the "double reduction policy" is a change of circumstances should consider whether it meets the following four elements in the specific contractual relationship: (1) The "time" element The situation refers to all the objective facts that are the basis or environment for the establishment of a legal act, and the objective facts that occurred before the conclusion of the contract have constituted the basic conditions for the conclusion of the contract, and the parties set their rights and obligations on this premise, indicating that the contracting parties voluntarily bear the risks that may arise. (Wang Liming, Yang Lixin, Wang Yi, Cheng Xiao, "Civil Law" (6th Edition), Law Press, 2020, p. 682.) Therefore, the application of the change of circumstances rule should be considered when rescinding contracts signed before the promulgation of the "double reduction policy"; contracts signed after the promulgation of the "double reduction policy" should be regarded as the acceptance of the "double reduction policy" by both parties and should no longer be used as a reason to claim relief of liability. (2) "Unforeseeable" elements To judge whether the change of situation is "unforeseen", on the one hand, the professional ability of the party in this field should be considered, and the professional ability should not exceed its ability. Although the training institutions are professional institutions in the field of education and training, they have a strong professional ability to deal with business risks. However, it is difficult for any training institution to predict national policies that go beyond commercial risks. This raises the question of whether a change in circumstances is "unforeseeable", which is another aspect to consider, I .e. what is a commercial risk. Commercial risks are inherent in the market system (Guiding Opinions on Several Issues Concerning the Trial of Civil and Commercial Contract Disputes under the Current Situation (Fa [2009] No. 40)), and commercial risks in the education and training industry should mainly come from factors such as the educational environment, the economic environment and market competition. The state's regulation of the industry should consider whether it is a commercial risk according to the degree of regulation. The author believes that if it is only a policy that promotes the standardized development of the industry and guides the industry's charging standards, it should be a commercial risk; if the national policy is sufficient to change the industry model, causing the vast majority of practitioners Unable to continue operating, it should not be a commercial risk. (3) "Non-imputable" elements The fact that caused the change of circumstances should be an objective fact that cannot be attributed to the parties, and the parties are not at fault for the occurrence of the fact, so the parties do not have the problem of liability for breach of contract. The "double reduction policy" is a policy formulated by the state for the continuous regulation of off-campus training, which can be decided by both parties to the contract and should belong to the "non-imputable" element. (4) Continued performance of the contract is "manifestly unfair" to one of the parties" The change of circumstances system is designed to balance the interests of the parties and to free the adversely affected party from the obvious unfairness that may result from the continued performance of the contract. The "apparent unfairness" that constitutes a change of situation must include the following four aspects: 1. The apparent unfairness must reach the level that the relationship between the rights and obligations of both parties obviously violates the principle of fairness and equal compensation; 2. The result of apparent unfairness must be borne by the parties to the contract. 3 Judging whether there is apparent unfairness shall be based on the time when the debtor performs the debt; 4 There must be a considerable causal relationship between the change of circumstances and the result of apparent unfairness. (Chief Editor of the Leading Group for the Implementation of the Civil Code of the Supreme People's Court: Understanding and Application of Civil Code Contracts, People's Court Press, 2020 edition, pp. 483-484.) The promulgation of the "double reduction policy" makes it difficult for training institutions to make profits through training in business disciplines, and requiring training institutions to continue to perform their contracts will result in a large amount of inaction and no return, in line with the above-mentioned "obviously unfair" elements. Below, the author combines specific cases to analyze the application of the change of circumstances rule in contract disputes caused by the "double reduction policy" policy. 3. case analysis (I) housing lease contract dispute 1. The Intermediate People's Court of Jinan City, Shandong Province (2022) Lu 01 Civil Judgment No. 878 held that the "double reduction policy" has obvious impact on discipline off-campus training institutions, and the performance of the contract between the two parties constitutes the cause of the change of circumstances. Therefore, xxx Education issued a "Notice of Withdrawal of Rent" to xxx Company, requesting to terminate the contract and actually vacate and return the house on October 16, 2021, which is relatively reasonable. However, xxx Education's early termination of the contract objectively caused certain economic losses to xxx Company. Based on the actual situation of this case and the principles of fairness and reasonableness, xxx Education's request for xxx Company to return the over-paid rent is not supported. The Civil Judgment No. 2486 issued by Guangzhou Intermediate People's Court of Guangdong Province (2022) Yue01 Minzhong holds that after the implementation of the "double reduction" policy, Wu X cannot continue to operate education and training, and its contract purpose cannot be realized. Moreover, as a newly issued policy of the state, the "double reduction" is implemented with great strength and short preparation period, which is indeed a major change that both parties cannot foresee when signing the lease contract, has exceeded the scope of general commercial risk, if the continued performance of the case-related lease contract, for Wu x there is a clear unfairness. Therefore, the first instance found that the termination of the contract could not be attributed to either party of Wu x and Guangzhou xx culture communication co., ltd, which was not improper. In the housing lease contract, the relevant provisions of force majeure or change of circumstances shall be applied to the purpose of the contract. If the contract clearly stipulates that the purpose of leasing housing for training institutions is subject training, the purpose of subject training has been discussed above, and the "double reduction policy" should be identified as a force majeure factor. The training institution shall have the right to propose the termination of the contract and shall not be liable for compensation. If the purpose of the contract is not stipulated in the contract, the leased house can still be used for other business activities, it is not appropriate to directly determine that the "double reduction policy" leads to the failure to achieve the purpose of the contract, and the force majeure rule is not applicable. However, the "double reduction policy" does make it impossible for training institutions to continue to make profits through the operation of education and training business. If they propose to terminate the contract on the grounds that they will no longer continue to operate, the change of circumstances rule shall apply. In this case, the landlord shall refund the corresponding rent, and the training institution shall not pay the liquidated damages or be unable to obtain the deposit for not notifying the termination of the contract in advance, but the training institution shall compensate the landlord for the loss caused by the early termination of the contract. (II) join the cooperation contract dispute Beijing No. 3 Intermediate People's Court (2021) Beijing 03 Civil Judgment No. 16658 held that the matter stipulated in the "Cooperation Contract" is to set up children's English training, and the party carrying out the training needs to have education and training qualifications. Yuan Heng xx Company does not have the above training qualifications, and based on the "double reduction policy" relevant departments no longer approve companies whose business scope includes education and training, so Yuan Heng xx Company actually does not have the conditions to continue to perform the "Cooperation Contract. The court of first instance ruled that the "Cooperation Contract" no longer has the realistic conditions for continued performance and should be canceled. There is no improper, and the court confirmed it. Joining cooperation is a common business model adopted by training institutions. In order to earn brand usage fees, the brand partners recruit students by using brand influence, and the two sides cooperate to carry out education and training business. The "double reduction policy" stipulates that all discipline training institutions should be registered as non-profit institutions, so the profit purpose of the contract between both parties is difficult to achieve, in line with the relevant provisions of force majeure, both parties have the right to propose to terminate the contract. After the termination of the contract, the franchisee shall not continue to use the brand party's brand operation, the brand party shall, in accordance with the other cost calculation terms agreed in the contract, deduct the expenses payable by the franchisee during the use of the brand, and return the remaining part. (III) sales contracts, service contracts, etc. The People's Court of Yiling District, Yichang City, Hubei Province (2021) E 0506 Min Chu Civil Judgment No. 2863 held that before the "double reduction policy" was issued, the basic conditions of the contract had undergone major changes that the parties could not foresee at the time of the conclusion of the contract and did not belong to commercial risks, which constituted a change of situation according to law. Combined with the actual situation of the case, the plaintiff claimed a loss of 20160 yuan, the House does not support. In the long-term operation process, training institutions will sign long-term cooperation contracts with upstream and downstream units in the training industry, such as purchasing teaching materials, teaching software, advertising, etc. As training institutions are unable to continue to operate or make profits in the course of operation due to the influence of the "double reduction policy", requiring training institutions to continue to perform the above-mentioned contracts does not have any positive significance for the operation of training institutions. on the contrary, it will cause further deterioration to training institutions that have difficulties in operation. Therefore, the impact of the "double reduction policy" in such contractual relations is in line with the change of circumstances, and the training institution has the right to terminate the contract through consultation or judicial procedures. At this time, the unperformed part of the contract shall no longer be performed by both parties, and the training institution shall pay the corresponding expenses for the part that has been performed by the other party, and the necessary upfront costs paid by the other party for the performance of the contract shall also be compensated by the training institution. In summary, for non-education and training contract contract disputes, the "double reduction policy" may constitute force majeure, may also constitute a change of circumstances, it is necessary to combine the specific purpose of the contract can be achieved, whether the contract can continue to perform and other elements to judge how it is applied in the specific contractual relationship. If it is determined that the change of circumstances rules are applicable, the training institution shall, in addition to paying the corresponding expenses according to the performance of the contract, compensate the other party for the losses caused by the early termination of the contract. The loss should be limited to those that are clearly evidenced and does not include expected gains, liquidated damages, etc. In short, the responsibilities of all parties should be reasonably distributed under the principle of equality and fairness to achieve overall fairness and justice.

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