Case Interpretation: Debt Transfer and the Third Person's Performance Standard

Zhou Wei

Debt transfer and third-person performance are the most controversial issues in the judicial practice. In response to this problem, the author analyzes this according to relevant laws and regulations and court judgments for your reference.

[case name]

Duan Guocheng and Ren Yueji, Bazhou Anda Real Estate Co., Ltd.

[case index]

Supreme People's Court (2017) Supreme People's Court No. 724 Civil Ruling

[Basic case]

Retrial applicant (first-instance plaintiff, second-instance appellant): Duan Guocheng.

The respondent (the defendant in the first instance, the appellee in the second instance): Ren Yueji.

Respondent (defendant in first instance, appellee in second instance): Bazhou Anda Real Estate Co., Ltd.

Legal representative: Ren Yueji, chairman of the company.

The Supreme Law believes that: 1. The case concerning Ren Yueji, Hu Yingmei and Duan Guocheng’s case concerning the “Agreement” (hereinafter referred to as the Tripartite Agreement) constitutes a debt transfer or a third party’s performance on behalf of the third party. Article 84 of the Contract Law of the People's Republic of China stipulates that if the debtor transfers all or part of the contractual obligations to a third party, it shall be approved by the creditor. Article 65 stipulates that the parties agree that the third party shall perform the debts to the creditors, and that the third party fails to perform the debts or that the performance of the debts does not conform to the agreement, the debtor shall bear the liability for breach of contract to the creditors. The main difference between debt transfer and third-party performance is whether the debtor withdraws from the original debt-debt relationship. In the case of debt transfer, the third party completely replaces the position of the debtor, the debtor withdraws from the contractual relationship, and the original contractual relationship is eliminated. In the case of a third person’s performance, the third person is only the debtor who performs the principal rather than the contract. A creditor can only use a third person as a supporter of debt performance and cannot be a party to the contract. In this case, Article 3 of the tripartite agreement between the parties stipulates that Hu Yingmei will be in the construction of the Anda Company's North Shore Main Canal real estate project in the real estate mortgage loan, the loan can be used to repay the loan to Duan Guocheng, Ren Yueji to assist in handling the relevant loan mortgage formalities. Article 4: Hu Yingmei recognizes Ren Yueji's repayment behavior. Ren Yueji deducted the above amount from Hu Yingmei's real estate sales in the construction project of the North Coast Canal of X× County. After the above payment was made, Hu Yingmei and Duan Guocheng both sold the case. After Ren Yueji paid part of the payment, Duan Guocheng’s receipt also clearly stated that “Receipt Ren Yueji instead of Hu Yingmei and borrow 10 million yuan from the North Shore Main Canal Project”. According to this, the second-instance judgment found that Hu Yingmei did not withdraw from the private lending relationship between him and Duan Guocheng. Ren Yueji was only the party to perform on his behalf. He was the assistant to Hu Yingmei’s debts. Hu Yingmei, as the debtor, still had the obligation to repay the loan. The tripartite agreement constitutes a legal relationship for the third party to perform, rather than a debt transfer relationship, and there is no improper determination of the facts and applicable law.

In the end, the Supreme Court ruled to dismiss Duan Guocheng’s application for retrial.

[Lawyer analysis]

The so-called debt transfer refers to the debtor transferring all or part of the contract debt to a third party. Debt transfer mainly has the following characteristics: (1) the debtor must transfer the debt with the creditor's consent; (2) the third party replaces the original debtor with the transferred debt to become the debtor of the original contractual debt relationship, and the original debtor leaves the original contractual relationship; The creditor can only claim claims from the third party and cannot claim to the original debtor.

The so-called third-person performance is the situation in which the person performing the contractual obligations is a third party other than the parties to the contract during the performance of the contract. The main features are as follows: (1) The entity of the original contract creditor's debt relationship has not changed substantially; (2) When the third party fails to perform the debt or the performance of the debt does not conform to the agreement, the creditor can only claim the creditor's right to the original debtor, but not to the third party. Advocate.

The essential difference between the two is whether there is any change in the original contract creditor's debt relationship, and whether the debtor withdraws from the original creditor's debt relationship.

In summary, it is recommended that the parties should make a clear agreement when transferring debts or stipulate that they should be executed by a third party to avoid unnecessary disputes.

 

【by law】

Contract Law of the People's Republic of China

Article 65 If the parties agree that the third party will perform the debts to the creditors, and the third party fails to perform the debts or the performance of the debts does not conform to the agreement, the debtor shall bear the liability for breach of contract to the creditors.

Article 84 If the debtor transfers all or part of the contractual obligations to a third party, it shall be approved by the creditor.

Article 85 If the debtor transfers the obligation, the new debtor may claim the defense of the original debtor against the creditor.