Aunt Li was upset about her recent deal of house purchase which should have been a pleasant experience, as the fulfillment order of payment ownership transfer of the house was not specified clearly in the transaction contract between herselfMr. Liu, the seller the latter refused to transfer the ownership of the house, requested to terminate the contract. Thus aunt Li had to launch a lawsuit to the court with resignation. Recently, Hongkon District People's Court concluded the case, ruling that Mr. Liu cooperate with aunt Li to go through the procedures for transferring the property ownership. 

In February 2016, aunt Li, who wished to live nearer to her son’s house, signed a housing transaction contract with Mr. Liu, which provided that the price of the house, RMB 1.6 million, shall be paid in two installments, with the first installment of RMB 900,000 being paid on the date of contract execution,the remaining RMB 700,000 on the date when the transfer document of the property ownership was delivered. After the contract was signed, aunt Li paid, in a timely manner, the first installment of RMB 900,000 as the down payment. However, when aunt Li asked Mr. Liu to cooperate with her to go through the procedures for the transfer of the property ownership, the latter refused to provide cooperation on the ground that aunt Li had not paid the balance of the RMB 700,000. Aunt Li thought that Mr. Liu should cooperate with her to go through the procedures for the transfer of the property ownership before she paid the balance. As both parties could not reach a consensus, aunt Li instituted a lawsuit to request the court to require that Mr. Liu continue to perform the contract,cooperate with her to go through the procedures for the transfer of the property ownership. 

During the trial, Mr. Liu filed a erclaim against aunt Li to request for terminating the contract on the ground that she had not paid the balance of the house price. Aunt Li said it was not her intention to delay the payment of the balancethe fact was that Mr. Liu took no notice of the notifications repeatedly issued by the real estate agent, asking him to provide cooperation in the tax audit before the transfer of the property ownership aunt Li therefore did not pay the balance to protect her own interests. According to Mr. Liu, to transfer the property ownership first might expose him to trading risks in case aunt Li did not have the ability to pay. To prove her ability to pay, aunt Li delivered the balance of RMB 700,000 to the court for custody.

After the trial, Hongkon District People's Court held that the transaction contract only agreed that the remaining RMB 700,000 should be paid on the date of transfer of the property ownership, but did not clarify the order of payment ownership transfer on that date therefore, both aunt Li and Mr. Liu shall have the defense right of simultaneous performance, that is, aunt Li shall have the right to refuse to make payment before Mr. Liu performed the obligation of delivering relevant documents for transfer of the property ownership, Mr. Liu shall also have the right to refuse to perform such obligation before aunt Li made the payment. However, according to the principle of protecting transactions, in the light of the fact that aunt Li has delivered the remaining RMB 700,000 to the court for custody, the court ruled that Mr. Liu continue to perform the contract to cooperate in the ownership transfer and dismissed Mr. Liu’s erclaim.

The court reminded that the housing salespurchase contract should not only agree on the specific timeperiod of payment transfer of the property ownership, but also on the order of performance thereof to avoid disputes in the actual process of the transaction.

Article 60 of the Contract Law of the People’s Republic of China: each party shall fully perform its own obligations as agreed upon.

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Article 66 where both parties have obligations toward each otherthere is no order of priority in respect of the performance of obligations, the parties shall perform the obligations simultaneously. Each party has the right to reject any demand by the other party for performance prior to the performance by the other party. If the performance of the obligations of the party who is to perform first is not in conformity with the agreement, the party who is perform later has the right to reject the other partys demand for corresponding performance.

(All names herein are assumed ones.)

(Authored by Wu Yan from Shanghai Hongkon District People's Court)