The Judicial Logic and Legal Basis of Financing Circular Sale Cases
Financing circular sale is a common trading mode in practice,which is nominally a contract of sale,but essentially a contract of loan.When hearing such cases,the court should adopt a look-through reviewing method,namely,including all parties involved in the litigation process and comprehensively reviewing the entire trading chain.When the transaction involved constitutes a financing circular sale,each contract of sale should be deemed invalid as a false manifestation of intent.The hidden juristic acts under contracts of sale include both the contract of mandate between the intermediary and the borrower,as well as the"half'con-tract of loan between the intermediary and the lender,and between the borrower and the lender.With Article 925 of the Civil Code of People's Republic of China and the overall interpretation method of transactions,it can be determined that there exists a contract of loan between the lender and the borrower.The intermediary is not a party to the contract of loan and has no obligation to repay the principal and interest of the loan.The intermediary also shall not be liable for compensation in accordance with the law for losses caused by the borrower's inability to repay the loan to the lender.
Financing Circular SaleContract of SaleFalse Manifestation of IntentHidden Juristic ActContract of Loan
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