| Article 641 Paragraph 1 of the Chinese Civil Code has the effect of concurrent condition and the seller has the right to terminate the contract and request the return of the goods when the buyer fails to pay the price as agreed. Article 641 Paragraph 2 of the Code, which provides that “the ownership of the subject matter retained by a seller, without being registered, may not be asserted against a bona fide third person”, aims to guarantee the payment of the creditor’s rights in the price and retains the priority order through the registration and notice filing system. A retention-of-title seller has the right to choose either the remedy in Paragraph 1 or that in Paragraph 2, but not both. Interpreting retention of title as a security interest from a functionalist viewpoint will not only inevitably confuse the true purpose and effect of the transaction between the parties and damage the freedom of contract, but also make it difficult for the retention of title to integrate itself into the absolute ownership of the property law system of China. Under the framework of maintaining the ownership structure, interpreters can achieve a balance between the rights and obligations of both parties by weakening the ownership status of the seller and strengthening the substantive rights of the buyer. When the buyer delays payment, the seller has the right to take back the goods temporarily and waive the conditions for deferral of the transfer of title in order to get the price paid with priority. He also has the right to reclamation and liquidation after the contract is terminated. When the seller reclaims the retained goods, the unregistered retention-of-title seller also has the right against the seizure creditor and the insolvency representative, but not against bona fide acquirers, including the secured party. |
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