Real estate perspective: the application of the extended period of overdue delivery in the context of the Civil Code.

Published:

2021-12-11

Presentation of 1. issues In practice, the developer and the buyer signed the "commercial housing sales contract", in the agreed housing delivery period at the same time, in order to avoid the late delivery of the liability for breach of contract, agreed on a fixed period of extension, the developer does not bear the responsibility for late delivery of breach of contract. Before the implementation of the the People's Republic of China Civil Code (hereinafter referred to as the Civil Code), the Intermediate People's Court of Jinan City and the courts under its jurisdiction mostly cited the relevant provisions of the the People's Republic of China Contract Law (abolished, hereinafter referred to as the Contract Law), and tended to think that the agreement on "late delivery of extended period" was legal and effective. The terms on extended period were the agreement of both parties and did not obviously infringe the interests of the buyer, it also does not violate the mandatory provisions of laws and administrative regulations. Both parties shall perform in accordance with the agreement. The starting time for the developer to bear the liquidated damages for overdue house delivery shall be calculated after the expiration of the grace period. However, the Civil Code has made more stringent provisions on the format clause, and will there be a change in the determination of the validity of the late delivery extension period? New Rules on Form Clauses in the Civil Code of 2. Article 496, paragraphs 1 and 2, of the Civil Code Contract Code, respectively, states: "A format clause is a clause that the parties have prepared in advance for reuse and has not negotiated with the other party at the time of the conclusion of the contract." "Where a contract is concluded by standard terms, the party providing the standard terms shall follow the principle of fairness to determine the rights and obligations between the parties, and take reasonable measures to remind the other party to pay attention to the terms that have a significant interest in the other party, such as the exemption or reduction of its responsibilities, and explain the terms in accordance with the requirements of the other party. If the party providing the form clause fails to perform its obligation to prompt or explain, resulting in the other party failing to pay attention to or understand the clause in which it has a material interest, the other party may claim that the clause does not become the content of the contract." This provision provides for the format clause and the obligation of the party providing the format clause. Compared with Article 39 of the original Contract Law, the following major amendments have been made: 1. After "taking reasonable measures to remind the other party to pay attention to exemption or reduction of its responsibilities", the content of "clauses with significant interests with the other party" is added. This means that the clauses that exempt or reduce the responsibilities of the party providing standard clauses are not the only clauses that need to be reminded of the other party, and other clauses that have significant interests with the other party also need to be reminded. This obviously expands the scope of drawing the attention of the other party, and all clauses that have a major interest in the other party are within the scope of prompting attention. 2, increase the consequences of not fulfilling the duty of care to remind the other party. Article 39 of the original "Contract Law" does not provide for the legal consequences of not fulfilling the obligation to prompt the other party to pay attention, so it is called "soft obligation". This article supplements this by providing the legal consequences of "if the party providing the standard clause fails to perform its obligation to prompt or explain, resulting in the other party failing to pay attention to or understand the clause in which it has a material interest, the other party may claim that the clause does not become the content of the contract. To advocate that "clauses that have a significant interest relationship with the other party" do not become an integral part of the contract is tantamount to declaring that it does not exist and has no effect. Such legal consequences are sufficient to warn the party providing the standard clauses to exercise utmost care and protect the other party's rights and interests., Also protect your own rights and interests. 3. This article also adds the "unreasonably" restriction language, increasing the circumstances of mitigation of liability, in other words, must achieve unreasonable exemption or reduction of its liability, increase the other party's liability, in order to make the format clause invalid. On the other hand, "excluding the main rights of the other party" is revised to "restricting the main rights of the other party", and the qualification of "unreasonable" is added. In this way, the limitation of the other party's rights and the exemption or reduction of its liability, increase the other party's liability side by side, constitute the same exemption, that is, any unreasonable exemption or reduction of its liability, increase the other party's liability, limit the other party's main rights, will lead to the invalidity of the format clause. In addition, the Civil Code has also adjusted the reasons for the invalidity of the format clause, mainly reflected in: the party providing the format clause unreasonably exempts or reduces its liability, increases the liability of the other party, and restricts the other party's main rights. These circumstances are not expected by the parties to the contract when they conclude the contract, are contrary to the purpose of the parties to conclude the contract, seriously damage the legitimate rights and interests of the other party, and obviously violate the basic principles of civil law, such as the principle of fairness. Therefore, they are all legal causes that lead to the invalidity of the standard clause. As long as one of the circumstances occurs, the standard clause is invalid. 3. related cases (I) 2021 Lu Minshen 974 Commercial Housing Sales Contract Dispute Judgment of Shandong Higher People's Court: After review, this court believes that the "Qingdao Commercial Housing presale Contract" signed by the buyer and the seller is legal and valid, and both parties should perform their contractual obligations. The "Qingdao Commercial Housing presale Contract" clearly stipulates that the delivery date is before March 31, 2019. The supplementary terms of the contract stipulate that the seller fails to deliver the house to the buyer within the time limit stipulated in this contract due to its own reasons, the buyer shall give the seller A 30-day extension period, during which the contract continues to be performed, and the seller does not need to bear the liability for breach of contract to the buyer. The buyer shall exercise prudent care over the contents of the supplementary clause, and the buyer, as a person with full civil capacity, shall be aware of the legal consequences of its signature on the contract, and the buyer shall not support the claim that the clause is a standard clause and that the seller has not fulfilled its obligation of clear notification and presentation. (II) 2021 Lu 01 Min Zhong 6181 Commercial Housing presale Contract Dispute The judgment of Jinan Intermediate People's Court: The commercial housing sales contract and supplementary agreement signed by the original and the defendant are the true intentions of the parties, and do not violate the mandatory provisions of laws and regulations, and are legal and effective. Both parties should fully perform the contract. In this case, the first item of Article 3, paragraph 8, of Annex 5 to the contract signed by the plaintiff and the defendant stipulated a grace period of 60 days for the seller's specific delivery time. This clause is an agreement between the parties, which does not obviously infringe on the interests of the buyer, nor does it violate the mandatory provisions of laws and administrative regulations, and both parties shall perform in accordance with the agreement. Therefore, the starting time for the seller to bear the liquidated damages for overdue delivery shall be calculated after the expiration of the 60-day grace period. (III) 2021 Lu 0102 Minchu 1295 Commercial Housing presale Contract Dispute The People's Court of Lixia District of Jinan City ruled: The "Jinan City Commercial Housing Sales Contract", "Supplementary Agreement", and "Compensation Confirmation Form" signed by the buyer and the seller are the true intentions of both parties and do not violate the effectiveness of laws and administrative regulations. The mandatory provisions do not violate public order and good customs, and are legal and effective. As a person with full capacity for civil conduct, the buyer is punishing his own rights, and he has not submitted evidence to prove that the seller is in a situation of coercion or taking advantage of the danger of others, so the buyer requires the seller to pay another 90-day penalty, which has no factual and legal basis, and this court does not support it. 4. Lawyer's View The author is inclined to believe that, on the premise that the developer fulfills the obligation to prompt or explain the grace period, the "late delivery extension period" should be considered valid for the following reasons: First of all, before the entry into force of the Civil Code, the Contract Law and its related judicial interpretations contained relevant provisions on standard clauses. Combined with the search of cases before the entry into force of the Civil Code, the determination of "standard clauses" in judicial practice was still With a cautious and conservative attitude, it is determined that the agreement of "late delivery extension period" is legal and valid. The current Civil Code retains some of the provisions of the original Contract Law and related judicial interpretations on "format clauses", and the cases before the entry into force of the Civil Code have certain reference value. For example, in (2021) Lu 01 min zong No. 6177 civil judgment, Jinan intermediate people's court, following the principle of the same case and the same judgment, directly quoted the contents of the judgment of the same court: "regarding the liquidated damages for overdue house delivery, the effect of article 3, paragraph 8, of the supplementary agreement, the civil judgments (2020) Lu 01 min zong No. 9658 and No. 9661 made by Jinan intermediate people's court are as follows: the Supplementary Agreement signed by both parties stipulates a grace period of 60 days for the seller's specific delivery time. This clause is an agreement between the parties, which does not obviously infringe on the interests of the buyer, nor does it violate the mandatory provisions of laws and administrative regulations, and both parties shall perform in accordance with the agreement. Therefore, the starting time for the seller to bear the liquidated damages for overdue delivery shall be calculated after the expiration of the 60-day grace period." Secondly, on the one hand, the Civil Code makes stricter provisions on the standard clauses, but on the other hand, the provisions also add expressions such as "significant interests" and "unreasonable exemption or mitigation". There is no relevant judicial interpretation to clarify how to define "significant" and "unreasonable", which belongs to the discretion of judges in the process of hearing cases. The author believes that the "significant", "unreasonable" and other qualifiers, to a certain extent, can avoid the risk of "exemption is the format clause. Although the "Supplementary Agreement on Commercial Housing Sales Contract" will exempt the developer from the responsibility for breach of contract for overdue delivery of the house to a certain extent, it should not constitute a situation of "unreasonably exempting or reducing its responsibility and increasing the responsibility of the other party. Finally, as far as both parties are concerned, the main contractual obligation of the buyer is to pay the purchase price on time, and the main contractual right is to accept the house according to the contract; as a developer, its main contractual obligation is to deliver the commercial housing that meets the conditions stipulated by laws and regulations according to the contract. The agreement on the leniency period does not invalidate the contract or clause in Chapter 6, Section 3 and Article 506 of Title I of the Civil Code, nor does it increase the buyer's contractual obligations. It only conditionally exempts the developer from part of the responsibility as the seller, rather than completely or indefinitely exempting the developer from the responsibility of handing over the house. At the same time, the clause still stipulates that if the developer fails to hand over the house within the leniency period, the buyer may still be held liable for breach of contract in accordance with the contract and does not exclude the buyer's contractual rights. Therefore, the agreement of the late delivery grace period should not be recognized as the category of the buyer's "main rights", let alone the buyer's "main rights are restricted or excluded". To sum up, the terms of the extension period are the agreement of both parties, which does not obviously infringe on the interests of the buyers. The agreement of the extension period only delays the time for the developer to assume the responsibility of overdue delivery or exempts the developer from the responsibility of overdue delivery. Part of the responsibility, it does not fall under any of the circumstances of "unreasonably exempting or reducing its liability, increasing the liability of the other party, limiting or excluding the main rights of the other party" as stipulated in article 496 of the Civil Code.

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