Real estate perspective: "cumulative payables" is the total price of commercial housing or overdue payables?

the raising of the problem

Article 7 of the 2000 edition of the "Model Text of Commercial Housing Sales Contract" jointly issued by the former Ministry of Construction (now the Ministry of Housing and Urban-Rural Development) and the former State Administration for Industry and Commerce (now the State Administration for Market Regulation) provides the following model clauses:

Article 8 of the 2014 edition of the "Model Text of Commercial Housing Sales Contract" jointly issued by the above two departments has not made substantial amendments on the basis of the above clauses, and provides the following model clauses:

The expression "cumulative payable" appears in the buyer's overdue payment liability clause in the above two versions, but there are different views on whether the "cumulative payable" is the total price of the commercial housing or the overdue payable. The buyer advocates "cumulative payable" as the overdue payable to reduce the amount of liquidated damages, while the seller advocates "cumulative payable" as the total price of the commercial housing to obtain more compensation for breach of contract. For the meaning of "cumulative payables", this paper tries to analyze from two aspects of judicial practice and theory.

judicial practice viewpoint

There are two different views in judicial practice, one of which is that "cumulative payables" is the total price of commercial housing, and the other is that "cumulative payables" are overdue payables, which are illustrated by several cases cited below:

(I) support the case of "cumulative payable" as the total price of commercial housing.

1. Guilin Intermediate People's Court (2018) Gui 03 Min Zhong No. 308 Civil Judgment

Referee's Point of View: This case is a case where the seller rescinded the contract due to the buyer's overdue payment. The agreement in Article 7 of the Commercial Housing Sales Contract shall be applied to pay liquidated damages. The first-instance judgment found that it was not improper for the appellee Zhang Li to pay liquidated damages of 45396 yuan (the total house price of 907920 yuan × 5%) to the appellant Zhangtai Industrial Company at 5% of the accumulated payable, and the court maintained it.

2. Ningbo jiangdong district People's Court (2016) Zhejiang 0204 Minchu No. 4340 Civil Judgment

Referee's point of view: Both parties do not agree on the understanding of "paying liquidated damages to the seller at 10% of the accumulated payable" as stipulated in Article 8 of the contract text. The plaintiff believed that the "payable" was the total price of the house that was canceled after the breach of contract, while the two defendants believed that it was overdue payment. In this regard, the Court believes that if the parties' understanding of the terms of the contract is controversial, the true meaning of the terms should be determined in accordance with the words used in the contract, the relevant terms of the contract, the purpose of the contract, the trading habits and the principle of good faith. Article 8, paragraph 1 (1) of the contract stipulates that if the overdue period does not exceed 60 days... the buyer shall pay the seller one ten thousandth of the overdue payable liquidated damages on a daily basis, and the contract shall continue to be performed. Article 8, paragraph 1 (2) stipulates that if the overdue period exceeds 60 days, if the seller terminates the contract, the buyer shall pay the seller a breach of contract in accordance with 10% of the accumulated payable. The contract is divided into (1) and (2) two cases, respectively, agreed on the overdue not more than 60 days and overdue more than 60 days of liability for breach of contract, compared to (1),(2) gives the seller the right to terminate the contract. According to common sense and general law, the more serious the degree of breach, the more stringent the corresponding liability for breach of contract. The purpose of the contract termination system is to provide the necessary relief for the contract-keeping party when the contract cannot be performed. If the "cumulative payables" in (2) are understood as overdue payments, it will objectively result in the provision of the default liability agreement, which is not only contrary to the original intention of the parties at the time of the conclusion of the contract, but also not conducive to maintaining the stability of the transaction.... Therefore, the calculation of liquidated damages in this case should also be based on the total house price before the discount.

(II) support the case of "cumulative payables" as overdue payables

1. Shandong Higher People's Court (2019) Lu Min No. 474

Referee's point of view: According to Article 7, Paragraph 1, Item 1 (2) of the "Jinan Commercial Housing Sales Contract" signed by both parties on February 11, 2015, "The seller has the right to terminate the contract after more than 180 days. If the seller terminates the contract, the buyer shall pay the seller a penalty of 1% of the accumulated amount payable. ......" agreement to determine, that is, Bai Jing to Xikai property to pay liquidated damages of 3702.22 yuan [(6598.82 yuan +6591.70 yuan +357031.33 yuan) x 1%]. (The "cumulative payables" of the adjudication instrument are overdue payables)

2. Fangchenggang Intermediate People's Court (2019) Gui 06 Min Zhong No. 225

Referee's point of view: Article 8 of the contract in question stipulates that "the buyer shall pay liquidated damages to the seller in accordance with 3% of the accumulated payable within 15 days from the date of service of the notice of termination of the contract. ...... The overdue payables mentioned in this article refer to the difference between the due payables agreed in Article 7 and Annex 4 and the actual payment in this period", Fan Xinxiang has paid 64110 yuan for the house purchase, and the balance of 147000 yuan has not been paid, so the amount of liquidated damages Fan Xinxiang should pay to Jinta Company is 4410 yuan (overdue payables 147000 yuan × 3%). The court of first instance calculated the liquidated damages paid by Fan Xinxiang to Jintai Company as 6333.3 yuan based on the total price of the commercial housing involved in the case of 211110 yuan. There was an error and the court corrected it.

3. Beihai Intermediate People's Court (2014) Beimin No. 73

Referee's point of view: The contract in question is a form contract provided by the appellee party, and if the two parties dispute the understanding of the third clause of the contract, an explanation that is not conducive to the party providing the form clause shall be made in accordance with the law. In combination with the stipulations of various clauses in the contract involved, the "cumulative payables" stipulated in Article 3 of the contract shall be understood as the unpaid amount that the appellant shall pay to the appellee when the contract is terminated. Therefore, the liquidated damages in this case shall be calculated as 20% of the cumulative payables of 147000 yuan, I .e. 29400 yuan.

Views of our lawyers

According to the provisions of the first paragraph of Article 466 of the Civil Code, if the parties have a dispute over the understanding of the terms of the contract, the meaning of the disputed terms shall be determined in accordance with the provisions of the first paragraph of Article 142 of this Law. Article 142, paragraph 1, of the Civil Code stipulates that "the interpretation of the meaning of the opposite person shall be determined in accordance with the words used, taking into account the relevant provisions, the nature and purpose of the act, custom and the principle of good faith." The meaning of "cumulative payables" is explained below in terms of the meaning, system, purpose, principle of good faith and special provisions on format clauses.

Interpretation of (I)

"Cumulative" means to add up, and "payable" refers to all kinds of payments that should be paid but not yet paid in economic activities. It may be assumed that in the case of installment payment, if the buyer no longer pays the second installment after paying the first installment of the purchase price and meets the other conditions agreed in the contract that the seller claims liquidated damages, at this time, the seller can request the buyer to pay liquidated damages based on the "accumulated payable" according to the proportion agreed in the contract, and take the time of overdue payment of the second phase of the purchase price as the node. If the time for the buyer to pay the subsequent purchase price has not yet reached, then the "payable" at this time is obviously the second phase of the house price, and the "accumulated payable" is at most the purchase price of the first two phases, It cannot be the total price of the commercial housing.

(II) System Interpretation

Put the term "accumulated payables" into the entire contract terms. Take the 2014 version of the "Model Text of Commercial Housing Sales Contract" as an example. Article 8, paragraph 1 (1) of the contract stipulates that if the overdue date does not exceed the date, the buyer shall pay the seller__liquidated damages for overdue payables on a daily basis, and the contract shall continue to be performed. Article 8, paragraph 1 (2) stipulates that if the expiration date exceeds the date, if the seller terminates the contract, the buyer shall pay the seller a breach of contract in accordance with the cumulative amount payable. The second paragraph stipulates that if the seller does not terminate the contract, the buyer shall pay the default payment of the overdue payment on a daily basis. In the whole clause, the word "overdue payables" appears above and below, but the expression "accumulated payables" appears in the middle, and the above clause only lies in the difference between whether the seller claims to terminate the contract. In specific cases, regardless of whether the seller claims to terminate the contract, the loss caused by the buyer's breach of contract will not be too different, and the main purpose of the agreed breach of contract is to make up for the seller's loss, so the "cumulative payables" should be the same as the "overdue payables" under the same clause.

The (III) is interpreted in terms of the purpose of the contract and the principle of good faith.

If there is no special description in the contract, the breach of contract agreed in the contract is compensatory breach of contract, not punitive breach of contract, the main purpose of which is to make up for the loss caused by the breach. In the case of the seller only overdue payment of part of the purchase price, the buyer generally did not receive the part of the purchase price and produce a certain economic loss, the purpose of the contract is also to make up for this part of the loss, to the overdue payment of the purchase price as the base to calculate the breach of contract can better reflect the contractual purpose of the agreed breach of contract. In addition, the principle of good faith also requires that in the event of a dispute over the terms of the contract, it should be interpreted for the purpose of the terms at the time of the conclusion of the contract, rather than the parties blindly making an expanded interpretation that is not conducive to dispute resolution.

(IV) from the law on the special regulation of the format clause to explain.

Article 498 of the Civil Code stipulates that "if there is a dispute over the understanding of the format clause, it shall be interpreted in accordance with the usual understanding. If there are two or more interpretations of the format clause, the interpretation shall be made against the party providing the format clause. ......" From this point of view, if the dispute over "cumulative payables" cannot be interpreted through the usual understanding, the interpretation against the provider of the format clause is in line with the law. The format clause is often provided by the seller to its disadvantage, and the "cumulative payable" shall be the overdue payable.

At the same time, the second paragraph of 496 of the Civil Code stipulates that "where a contract is concluded with 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 exemption or reduction of its responsibilities. Provisions that have a major interest in the other party shall be explained 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." If the party providing the standard terms (usually the seller) thinks that the "cumulative payable" in the buyer's liability for breach of contract is the total price of the commercial house, but fails to remind the buyer in a reasonable way that the buyer should not bear the "aggravated liability for breach of contract" when concluding the contract even if it defaults, the "cumulative payable" should be interpreted as overdue payable instead of the total price of the commercial house.

Through the above analysis and interpretation of "cumulative payables", and taking into account the judicial decisions, our lawyers tend to believe that it is more reasonable to interpret "cumulative payables" as overdue payables as stipulated in the Model Text of the Commercial Housing Purchase and Sale Contract, which is also in line with the regulation of the standard terms of the law.

Advice from our lawyer

The meaning of "cumulative payables" in the "Model Text of Commercial Housing Sales Contract" is controversial, and the use of this expression should be avoided as much as possible in the process of concluding the contract. If there is such an expression in the signed commercial housing sale and contract, the other party shall be requested to explain the true meaning of "accumulated payable. In particular, if the seller (often a real estate developer) believes that the "cumulative payable" in the format clause provided by itself is the total price of the commercial housing, it should take a reasonable way to remind the buyer when concluding the contract, otherwise there is a legal risk that the claim will not be recognized. In the absence of any explanation or reminder as to the meaning of "accumulated payable", the Buyer may explain or defend against the above-mentioned point of view if a dispute arises.