Article 60 of the Contract Law of the People's Republic of China stipulates in principle the ancillary obligations of the parties to a contract, but it is not clear under what specific circumstances it can be determined that the parties constitute an ancillary obligation that must be performed, and how to deal with the liability for breach of ancillary obligations. Specifically, in practice, how to determine and clarify the difference between the ancillary obligation and the main obligation of the contract, and how to reasonably divide the liability for breach of the ancillary obligation?
Keywords: Ancillary obligations, liability for breach of contract, VAT invoices, and the right to defend against uneasiness
1. The value of ancillary obligations to the performance of the contract and the legal provisions
1. The legal value of the ancillary obligation
Ancillary obligations are in comparison with the primary obligations of the contract. The main obligations of the contract are closely linked to the formation of the contract and the realization of the purpose of the parties, and a serious breach of the main obligations of the contract will lead to the failure to achieve the purpose of the contract. If the debtor's failure to perform the main obligations of the contract constitutes a fundamental breach of contract, the creditor may have the right to rescind the contract.
In real life, ancillary obligations are more derived from the principle of good faith, which are related to the performance of the parties in accordance with the nature, purpose and transaction habits of the contract and the notification, assistance, confidentiality, etc., with the aim of promoting, guaranteeing and maintaining the smooth performance of the main obligations of the contract and the comprehensive and timely realization of the purpose of the contract.
2. Legal norms of ancillary obligations
According to the Contract Law of the People's Republic of China
Article 60: The parties shall fully perform their obligations in accordance with the agreement. The parties shall follow the principle of good faith and perform obligations such as notification, assistance, and confidentiality in accordance with the nature, purpose, and transaction habits of the contract.
3. Characterization of ancillary obligations.
First of all, according to the provisions of the Contract Law on sales contracts, contract contracts, service contracts and lease contracts, there are more than a dozen famous contracts in China. If you want to clarify the main obligations of the contract, you can determine the main rights and obligations of the parties to the contract according to the legal provisions of the famous contract.
Secondly, in real life, there are many nameless contracts that are not specified in the contract law with a unique name. The content of an anonymous contract may include a wide range of contents of several types of famous contracts, or a mixture of related contents such as property rights and creditor's rights, such as a "hidden shareholding agreement". In this case, I believe that the main content of the contract should be understood as a whole according to the main content of the contract, the nature of the contract and the purpose of the contract, so as to clarify the main obligations and rights of the contract and distinguish them from the ancillary obligations.
2. Form of Ancillary Obligations and Allocation of Liability for Breach of Ancillary Obligations
1. Form of Ancillary Obligation
The ancillary obligation itself is derived from the principle of good faith, and the law naturally does not require the parties to the contract to agree on the ancillary obligation. Therefore, ancillary obligations can be clearly agreed in writing, or they can be understood from the trading habits of both parties, the purpose of the contract and other aspects. The existence of a written agreement cannot be used as a reason to define whether it is an ancillary obligation to a contract, nor can the existence of an ancillary obligation be denied on the basis of the absence of a written agreement.
2. Liability for breach of ancillary obligations
Matters that are not agreed upon in the contract or that are unclear or uncertain do not necessarily constitute the ancillary obligations of the other party to the contract, but must meet certain conditions. According to the nature, purpose and trading habits of the contract, it is natural to deduce from the principle of good faith which party should bear the obligations of notification, assistance, confidentiality, etc., but it does not lead to the conclusion that the rights of one party are the obligations of the other party.
Second, even if an ancillary obligation is constituted by one of the parties to the contract and is not performed, it does not necessarily give rise to legal liability for breach of ancillary obligation. If there is evidence to prove that the other party knew or should have known about the relevant facts, and the relevant rights of the contract can be realized without the other party having to bear the so-called ancillary obligation such as notification, one party should not support the other party's claim for corresponding relief solely on the ground that the other party has failed to perform the ancillary notice obligation, otherwise it violates the principle of good faith.
3. Cases:
1. Is it possible to use the performance of the invoicing obligation as a defense against the payment obligation according to the transaction custom?
In general, the issuance of VAT invoices is not a major contractual obligation, but only an ancillary obligation. At present, ancillary obligations and primary contractual obligations have a distinctly different role in the realization of the purpose of the contract. Therefore, it is not sufficient to be a defence to the non-performance of the main obligation of the contract.
2. In this case, if the parties have expressly agreed that invoicing will be a prerequisite for payment, can it be used as a defense for non-performance of payment obligations?---- no.
(1) The law stipulates the right to defend against uneasiness
According to the provisions of Articles 67 and 68 of the Contract Law, the right of uneasiness defense refers to the right of the party that should perform first to refuse the corresponding performance request if the party who should perform the debt first fails to perform or the performance of the debt does not conform to the agreement in a contract performed by the parties to mutual debts at different times; In other circumstances where there is a loss or possible loss of the ability to perform debts, performance may be suspended.
and (2) an interpretation of the defendant's breach of contract in this case
After the two parties negotiated the termination, the plaintiff demanded that the defendant fulfill the payment obligation orally, by sending a lawyer's letter, filing a lawsuit, etc., but the defendant did not inform the plaintiff that it needed to issue an invoice, and until the trial of this case, the payment obligation was still not fulfilled. This fact illustrates:
First, the defendant breached the main obligation of the contract by failing to perform the payment obligation;
Second, the defendant objectively maliciously prevented the fulfillment of the payment terms by neglecting to exercise the right to inform the plaintiff of the invoice, which seriously violated the principle of good faith, and should be deemed to have fulfilled the payment terms and the defendant had breached the contract.
Third, the defendant did not request the invoicing after being reminded, and if the invoicing continued, the plaintiff's loss (the cost of taxes and fees would be increased), so the plaintiff had the right to defend against uneasiness.
3. What is the scope of the defendant's liability in this case?
In this case, the defendant's breach of contract was found and the plaintiff's claims for loss of service fees, attorney fees and capital occupation fees were basically upheld.
4. If it is not clearly agreed that invoicing is a prerequisite for payment, whether the non-invoicing can be used as a defense for refusal to pay?---- no.
The other party's claim that the plaintiff's failure to issue an invoice was a defense based on the "right to perform the defense first", but it was not established in this case. The defendant shall not have the right to defend the defendant for the breach of contract taken in order to achieve the purpose of delayed payment, as follows:
(1) Legal provisions
The right of defense of first performance refers to the right of the other party to suspend the performance of the contract in order to protect its own interests within the time limit or to ensure its performance of the conditions of the contract when the party who has the obligation to perform first in accordance with the contract or the law fails to perform its obligations within the time limit or the performance of the obligation seriously does not meet the agreed conditions. The right of first performance defense is essentially a defense of breach of contract, and in this sense, the right of first performance defense can become a right of remedy for breach of contract. Article 67 of China's Contract Law stipulates the right of first performance defense.
(2) Legal analysis of the cause of defense
As a kind of bilateral contract, according to the nature of the contract, the scope of the contract defense is limited to the consideration obligation, that is, if one party fails to perform the consideration obligation, the other party has the right of defense. The obligation to pay the service fee and the obligation to issue invoices are two obligations of different natures, the former is the main obligation of the contract, the latter is not the main obligation of the contract, and the two do not have a reciprocal relationship, and only the obligation of the reciprocal relationship has the applicable conditions for the first performance of the defense. If it is not an obligation of reciprocity, the right of first performance defence cannot be applied.
In this case, even though the obligation to issue an invoice was clearly stipulated as a precondition for payment, the fact that it was aware of the obligation to pay and had the right to request an invoice but neglected to exercise it objectively caused the fact of breach of contract of delayed payment, which could not be used as a defense for non-performance of the main contractual obligation.