Xiamen Yuanchang Real Estate Development Co., Ltd. v. Hainan Yuexin Group Co., Ltd. (Contract Dispute)—Disposal as to When the Active Claims Claimed by the Creditor to be Used for Offsetting Exceed the Statute of Limitations

Abstract

That both parties’ debts are due, as one of the positive conditions for the formation of statutory right of set-off, should be understood that both parties’ debts have entered the period for fulfillment, i.e., entering the state of performance, and there should be overlapping parts between the parties’ debts during the period from the time when the debts are due to the expiration of the statute of limitations. When the active claims claimed by the Creditor to be used for offsetting exceed the statute of limitations, because the statutory right of set-off has formed before the expiration of statute of limitations period, and no preemption is prescribed for statutory right of set-off in Chinese law, such claims can still be found to be lawfully set off, by taking full consideration of such factors as the guaranty function of the right of set-off, reasonable period for exercise, and substantive fairness.

Collegial panel judges of the Supreme People’s Court for re-trial: Chen Hongyu, Wang Yuying, Cao Gang (Written by: Chen Hongyu, Supreme People’s Court; Translated by: Niu Benlin).