Professional Interpretation

Abstract: Plaintiff (hereafter as P) lent the Defendant (hereafter as D) a factory. After signed the lease, D furnished the factory then started the operation. Later, said factory was included in the area of eminent domain, D is forced to stop producing and move out. D believes that since the production is paused due to eminent domain, D shall not bear rent during the move. P sued and request for rent. D raises a counterclaim asking P for cost of furnish. The court held that: "The lease over the illegal property shall be invalid. Since the concerned factory is on collective owned land and the building itself never be listed in the zoning plan, thus the building itself is unlicensed." Which leads to an issue, when the lease is deemed invalid, how does the lessor and the lessee bear the responsibility?

D should move out the building and pay the occupation charges. According the contract law, after a contract becomes invalid or is rescinded, any property obtained under the contract shall be returned. If it is impracticable or unnecessary to return the property, compensation shall be made at a price converted from the property. In this case, the lease in deemed invalid, thus the lease shall return the property while the pay the occupancy charges.

The P is main liable and D is secondary liable. The party at fault shall compensate the other party for the resulting loss. If both parties are at fault, they shall bear their respective liabilities.

The P knowingly rent an unlicensed building to D, which makes him bear the major liability for the invalid contract. Contract article 126, The lessor shall deliver the leased item to the lessee as pre-agreed, and maintain the leased item fit for the contracted purposes during the lease term.in this scenario, the P rent the building out knowing that the building violates the zoning ordinance, leads to the invalidity of the lease. The fault is on the leasor, thus he is liable.

When the defendant signed the contract, he did not the reasonably review and should bear the secondary liabilities. The lease should perform the duty of care when sign the lease. Lack the duty of care or sign the lease knowing the property is unlicensed, the leasee is also at fault thus

Bear costs.

The loss occurred from the invalidity of contract, include direct loss and indirect loss. When the contract is invalid and both party is liable for the invalidity, if loss occurs to one party, then both party should bear the liability according the degree of fault. The losses should limited to the ones pertinent to the lease but not the foreseeable ones.

In the dispute arising in lease, the direct loss is usually the restoration fee on fixing up the damages lease caused due to the unauthorized decoration. The usual indirect loss is due to the reliance on the lease, the lease’s cost for decoration.

The court hold that for the counterclaim for his cost incurred from the decoration, considering the fault on both party, the actual losses incurred to you and the performance of the contract, P shall bear 90% of the decoration costs.  

In conclusion, in this case, the P lent the unlicensed building to D, thus is mainly liable for the invalidity of the contract. D didn’t perform thorough review therefore shall bear the secondary liability for the invalidity. Due to the invalidity, the leasee shall return the property and pay the occupancy charges, while leasor shall pay compensate the loss incurred by leasee’s reliance, which is, in this case, the decoration costs.