130 Front.Law China(2006)1:121-152 Anticipatory breach Introduction Before the time due for performance,it may happen that the obligor expressly refuse to perform the contract,or it may become clear that the obligor,though does not refuse to perform,will be unable to perform the contract on the time due for performance.How to cope with this kind of obstacles of performance is so important a topic that it has attracted a lot of discussion between Chinese scholars before the enactment of CCL.The viewpoints may be divided into two categories.One category insisted that Chinese contract law should follow German law on this point,which means the remedy is to suspend performance as stipulated by art.321 of BGB(defense of insecurity).The other category suggested that Common Law's rule of"anticipatory breach of contract"is much better than the German rule.As art.321 of BGB only gives the other party a right to refuse to perform,2 while the Common Law rule gives the other party a further protection by permitting it seeking damages or other remedies even before the time due for performance.CCL adopts this suggestion(arts.108 and 94 sent.2).But it also has an article on defense of insecurity (CCL art.68). When may call it an anticipatory breach? According to art.108 ofCCL,there are two types of situations that can amount an anticipatory of breach.The first one is that a party explicitly expresses its intention not to perform its obligation,and it may be called anticipatory renunciation.The second type is that a party indicates by act its intention not to perform its obligation,and it may be called anticipatory disablement.Whether or not there is an anticipatory breach should be discussed separately. Where there is an anticipatory renunciation,the obligor's intention is clear and the future performance is not expectable.So it may be recognized as an anticipatory breach directly. As to the second type of situation,the obligor does not expressly refuse to perform its obligation,so it may not be recognized as an anticipatory breach promptly.Here it is necessary for the obligee to take some measures to make the matter clear.According to art.68 par.I of CCL,the party which ought to perform first may suspend its performance if it has exact evidence to prove that the other party falls under any of the following situations:(1) business operations seriously deteriorating;(2)diverting properties and withdrawing capital to evade debts;(3)falling into business discredit;or(4)other situations showing inability or possible inability to perform its obligations.Where the party suspend its performance in accordance with art.68 of CCL,it shall promptly notify the other party of the suspension.The party shall resume its performance when the other party provides a guarantee.The party that has suspended its performance may terminate the contract if the other party has failed to regain its capability to perform and to provide a guarantee within a reasonable period of time (CCL art.69).Here the termination of contract premises that the other party falls into a kind of anticipatory breach. 2This is the former rule of art.321 of BGB.It should be noted that the new art.321 par.2 permit the party required to perform first a night to termination. See Shiyuan Han Jianyuan Cui,Anticipatory breach and Chinese contract law,in CASS Journal of Law, No.3of1993.Anticipatory breach Introduction Before the time due for performance, it may happen that the obligor expressly refuse to perform the contract, or it may become clear that the obligor, though does not refuse to perform, will be unable to perform the contract on the time due for performance. How to cope with this kind of obstacles of performance is so important a topic that it has attracted a lot of discussion between Chinese scholars before the enactment of CCL. The viewpoints may be divided into two categories. One category insisted that Chinese contract law should follow German law on this point, which means the remedy is to suspend performance as stipulated by art. 321 of BGB (defense of insecurity). The other category suggested that Common Law’s rule of “anticipatory breach of contract” is much better than the German rule. As art. 321 of BGB only gives the other party a right to refuse to perform,21 while the Common Law rule gives the other party a further protection by permitting it seeking damages or other remedies even before the time due for performance.22 CCL adopts this suggestion (arts. 108 and 94 sent. 2). But it also has an article on defense of insecurity (CCL art. 68). When may call it an anticipatory breach? According to art. 108 of CCL, there are two types of situations that can amount an anticipatory of breach. The first one is that a party explicitly expresses its intention not to perform its obligation, and it may be called anticipatory renunciation. The second type is that a party indicates by act its intention not to perform its obligation, and it may be called anticipatory disablement. Whether or not there is an anticipatory breach should be discussed separately. Where there is an anticipatory renunciation, the obligor’s intention is clear and the future performance is not expectable. So it may be recognized as an anticipatory breach directly. As to the second type of situation, the obligor does not expressly refuse to perform its obligation, so it may not be recognized as an anticipatory breach promptly. Here it is necessary for the obligee to take some measures to make the matter clear. According to art. 68 par. 1 of CCL, the party which ought to perform first may suspend its performance if it has exact evidence to prove that the other party falls under any of the following situations: (1) business operations seriously deteriorating; (2) diverting properties and withdrawing capital to evade debts; (3) falling into business discredit; or (4) other situations showing inability or possible inability to perform its obligations. Where the party suspend its performance in accordance with art. 68 of CCL, it shall promptly notify the other party of the suspension. The party shall resume its performance when the other party provides a guarantee. The party that has suspended its performance may terminate the contract if the other party has failed to regain its capability to perform and to provide a guarantee within a reasonable period of time (CCL art. 69). Here the termination of contract premises that the other party falls into a kind of anticipatory breach. 21 This is the former rule of art. 321 of BGB. It should be noted that the new art. 321 par. 2 permit the party required to perform first a right to termination. 22 See Shiyuan Han & Jianyuan Cui, Anticipatory breach and Chinese contract law, in CASS Journal of Law, No.3 of 1993. 130 Front. Law China (2006) 1: 121–152