News

Since the outbreak of the new coronavirus pneumonia in early 2020, it has spread rapidly. It has been nearly two and a half years, but no end has been seen. During this period, various localities have launched first-level responses to major public health emergencies, and the government has issued a series of prevention and control measures to reduce the gathering and movement of people. Affected by the epidemic and prevention and control measures, the passenger flow and operating income of operating places such as hotels and restaurants have dropped significantly, and operators have suffered economic losses of various sizes. Due to less money being earned or even losing money, some civil and commercial disputes will inevitably arise between merchants and owners.

Case

On March 16, 2018, Mr. Yang and Mr. Wang entered into a shop lease contract, stipulating that Yang would lease three facade rooms to Wang to operate catering. The lease term is five years to March 15, 2023, and the rent for the first year is 48,000 yuan. , with an annual increase of 6% thereafter. After Wang paid the rent for 3 years, Wang did not pay the rent after March 16, 2021, but kept the house until March 22, 2022. Yang sued to the court, claiming: one is to ask Wang to pay the rent in arrears; the other is to ask Wang to pay liquidated damages. Wang then filed a counterclaim, claiming on the grounds of the outbreak of the epidemic: first, to terminate the lease contract; Will their claims be upheld by the courts?

Hereinafter, the author, in accordance with the "Guiding Opinions of the Supreme People's Court on Several Issues Concerning the Proper Trial of Civil Cases Involving the New Coronary Pneumonia Epidemic (1) and (2)" (hereinafter referred to as the "Guiding Opinions (1) and (2)"), Analysis of some legal issues arising from shop leasing contracts under the epidemic situation.

I Can the lessee claim to rescind the lease contract or reduce or exempt rent?

According to the relevant provisions of the contract chapter of the "Civil Code", after the contract takes effect, the relevant parties must abide by the implementation, and the breaching party will bear the responsibility for breach of contract; however, in the case of force majeure or change of circumstances, the contract can be changed or terminated; the difference is force majeure. The effect of the contract occurs of course, which is a legal change or the reason for the termination of the contract, and the change of circumstances does not occur naturally, and the parties need to request the arbitration institution or the people's court to modify or cancel the contract. Is the epidemic a force majeure or a change of circumstances?

Article 2 of "Guiding Opinions (1)" stipulates: "Accurately apply force majeure rules in accordance with the law. People's courts will accurately apply the specific provisions of force majeure when hearing civil cases involving epidemics, and strictly grasp the applicable conditions. For those directly affected by the epidemic or epidemic prevention and control measures. If the civil disputes arising from it meet the statutory requirements for force majeure, Article 180 of the General Principles of the Civil Law of the People's Republic of China, Articles 117 and 118 of the Contract Law of the People's Republic of China, etc. will apply. If other laws and administrative regulations provide otherwise, such provisions will be followed. If the party claims to apply force majeure partially or completely exempted from liability, it will bear the burden of proof for the fact that force majeure directly results in the failure to perform part or all of civil obligations.”

From this guidance, we can see that the epidemic can be regarded as force majeure. In the above case, Wang can claim to cancel the lease contract or reduce or exempt rent on the grounds that the epidemic is a force majeure and cannot perform the contract, but Wang must fully prove that he cannot operate due to the epidemic and the losses he has suffered.

II Is it reasonable that all losses should be borne by the lessor?

Article 3 of "Guiding Opinions (1)" stipulates: "Trial cases of contract disputes properly in accordance with the law. Cases of contract disputes arising from the direct impact of the epidemic or epidemic prevention and control measures, unless otherwise agreed by the parties, will be comprehensively applied when applying the law. Consider the impact of the epidemic on different regions, industries, and cases, and accurately grasp the causal relationship and causal force between the epidemic or epidemic prevention and control measures and the inability to perform the contract.

Article 1 of the "Guiding Opinions (2)" on the trial of contract cases stipulates in the first paragraph of sub-article 6: "The lease of non-state-owned houses for business operations, and the epidemic or epidemic prevention and control measures cause the lessee to have no operating income or a significant reduction in operating income. If it is obviously unfair to continue to pay rent in accordance with the original lease contract, and the lessee requests a reduction or exemption of rent, an extension of the lease term, or a deferral of rent payment, the people's court may guide the parties to conduct mediation with reference to the relevant rent reduction and exemption policies; if the mediation fails, the case wil be considered according to the actual situation, the contract should be changed according to the principle of fairness.”

From this guideline, we can see that it is unreasonable for the lessor to bear all the losses. The judicial organs will make the lessor and the lessee reasonable based on the principle of fairness and impartiality for the operating losses of non-state-owned shops caused by the epidemic or prevention and control measures. The sharing is not necessarily borne by the owner; after all, the owner takes a loan to buy a house and has to repay the bank mortgage regularly, so the pressure is not small. Therefore, it can be inferred that in the case, Yang's request for Wang to pay the rent arrears will be partially supported by the collegial panel. The specific amount of support will depend on the probative force of the evidence from both parties, and of course, how the judge exercises discretion.

III Can the lessor require the lessee to pay liquidated damages?

Article 1 of the "Guiding Opinions (2)" on the trial of contract cases stipulates in Sub-Article 5: "The rented house is used for business operations, and the epidemic situation or epidemic prevention and control measures cause the lessee to have difficulty in capital turnover or a significant decrease in operating income. The people's court will not support the request for rescission of the lease contract on the grounds that the person fails to pay the rent within the agreed period, and the lessee will bear the responsibility for breach of contract."

From the above guidance, it can be seen that Yang in the case cannot require Wang to pay the liquidated damages on the grounds that Wang did not pay the rent on time, but the two parties can sign a supplementary agreement to clarify the standard and time of rent reduction and exemption due to the impact of the epidemic through the supplementary agreement, and follow up with the supplementary protocol. In the follow-up operation, both parties should take effective means to inform the other party of the epidemic situation, resumption requirements, government announcements, etc., so that both parties can take relevant countermeasures in advance to avoid further expansion of losses.

Summarize

There are many more legal issues during the pandemic, of which the above are just a few. During this extraordinary period, I hope that when you encounter problems, you should not just stand in your own position to calculate the gains and losses, but also be able to think from the other side's position, focus on communication and negotiation, and give full play to the principle of "autonomy of will" in civil law. Helping each other to tide over the difficulties together, the epidemic is ruthless, people are compassionate, and we must unite our strength to move forward.