A. Rightof Subrogation (dai wei quan)
　
　The right of subrogation refers to where an obligor,in delaying his exercise of his proprietary right against a third party,jeopardizes the realization of the obligee’s contractual claim. In order toprotect the realization of his claim, The obligee can, by way of using his ownname in place of the obligor, exercise his proprietary right.
　　　　or instance, Company B owes Company A RMB1,000,000 in debt which is due on 12thOct 2001, Company C owes Company B RMB800,000 in debt which is due 10thOct 2001. On or after 12th Oct 2001, Company B has neither repaidCompany A its due obligation nor has it instituted a lawsuit or by way ofarbitration take positive measures against Company C for the repayment of thedebt in question. As such, according to the system of the right of subrogation,Company A can use its own name in place of Company B demand that Company Cdischarge its obligation that was due.
　
　1.The constitutive conditions of an obligee’s rightof subrogation are:
　　　　irstly, as between the obligee and obligor, there must be an existing legallybinding relation of contractual right and obligation. Due to the fact that anobligee’s right of subrogation is an accessory right, created out of the needto protect an obligee’s claim, then if between the obligee, who exercises hisright of subrogation, and the obligor, there is no existing legally binding,valid and affirmative contractual relation of rights and obligation, theobligee would lack the basis for his exercise of his right of subrogation.Secondly, the obligor must have been delayed in the performance of hisobligation and had been indolent in exercising his due claim against hissub-obligor. This means that the obligor neither performs his contractual obligationthat is due to the obligee nor does he, by way of lawsuits or arbitration, takeactive measures to the monetary claim that is due to him against hissub-obligor. First and foremost, regardless of whether it is the obligee’scontractual claim against the obligor, or whether it is the obligor’scontractual claim against the sub-obligor, both should be contractual claimsthat are due. The obligor must have not performed his obligation to the obligeethat is already due, nor must he have initiated his rights to his claim againsthis sub-obligor.
　　　　Also anessential condition is that the obligor’s inactivity must have caused damage tothe obligee.
　　　　Butjudging from the actual provisions of Contract Law, it seems that the obligor’sdelay in performance is not a necessary condition, however, from a reasonableperspective, Contract Law should rely on the obligor’s delay in performance asa constitutive condition for the exercise of the right to subrogation and thisshould be restricted to where the obligee has suffered damage from the delay inperformance of his due claim. In the Construction of Contract Law, it isfurther affirmed that that the obligor’s delay in performance should be aconstitutive condition for the right of subrogation,
　　　　nd this explanation is favorable to the striking of an equilibrium of thebeneficial relationship between the obligee and obligor.
　　　　建议将该注删除,内容太长）In addition, when exercising his right against the sub-obligor, the obligormust do so by way of either filing a lawsuit against the sub-obligor or byarbitration. Lastly, the obligor’s entitlement against the sub-obligor mustinvolve a monetary payment or a claim of debt.
　　　　hirdly, the obligor’s conduct must have caused damage to the due obligation ofthe obligee. The obligor’s indolence in the performance of the obligee’s dueobligation and his nonclaim for the due creditor''s rights must have caused theobligee’s due claim to be unrealized.
　　　　ourthly, the obligor’s obligation is not exclusive to the obligor’s personalrights.
　　　　s the interest of the object of subrogation, not only is it restricted to theobligor’s claim against the sub-obligor, it must also not be a personal rightbelonging exclusively to the obligor.
　　　　
　
　2.The method of exercising the right of subrogationby the obligee.
　　　　It isclearly stipulated in the Contract Lawthat the obligee’s exercise of his right of subrogation can be carried out byway of legal actions.
　　　　he reasons for legal actions in the exercise of right of subrogation are: Firstly,it is only through adjudication that it can be ensured that those obligees whoexercise their rights of subrogation can obtain a benefit, and that thebenefits are reasonably distributed among the obligees.Secondly, the exerciseof right of subrogation by way of adjudication can effectively prevent certainobligees from abusing their right of subrogation and thereby avoiding confusioncaused by civil circulation. Thirdly, it is effective in preventing disputesfrom arising, by providing that the only method to exercise the right ofsubrogation is by way of legal action. It can help prevent the conflict betweenthe obligees who use the prescribed method to institute their right ofsubrogation and those obligees who resort to direct measures. In addition, itcan effectively resolve the conflicts between the obligee and the obligor, andissues relating to the sub-obligor which are caused by the exercise of theright of subrogation.
　
　3.Issues on the validity of the right of subrogation.The validity of the right of subrogation involves the obligor, the third partyand the obligee himself. With regards to the obligor, once the obligee hasstarted exercising his right of subrogation and had notified the obligor ofsuch, the obligor is not to jeopardize the obligee’s disposition of hisinterest in the exercise of his right of subrogation, nor is he to abandon,absolve or assign or conduct himself in a manner that would erode the validityof the exercise of the right of subrogation. The benefit of validity in civillaw that is created by the obligee’s exercise of right of subrogation should godirectly to the obligee. As to third parties, the obligee’s exercise of hisright of subrogation is equivalent to the obligor’s exercise of his claimagainst them. At the same time, after having exercised the right of subrogationand notifying the obligor, the right of defence against the obligor that thethird party acquired as, can now be used to counter the oblige. Such defencesinclude the act of God and that the action beingtime-barred（已过诉讼时效）. As tothe obligee, the necessary expenses expended as a result of the exercise of theright of subrogation can be claimed by way of restitution against the obligor.Upon the reversion of the entitlement of the obligor, the obligee can make use ofthe proceeds from the realization of the assets to discharge his own claim.When the sub-obligor has performed his obligation to discharge himself from theobligor’s claim, and that the obligor still has claims from other obligees, theobligee who exercised his right of subrogation and the other obligees’ claimsare on par with all other claims and the obligees are all on the same standing.The obligee who exercised his right of subrogation would not have priority overthe other obligees in his claim.
　
　The Contract Law does not provide for the validity ofthe right to subrogation but the Constructionof Contract Law remedied this inadequacy of the law of contract. Firstly, withregards to the validity on the obligor, once the obligee institutes a legal actionagainst the sub-obligor to establish his right of subrogation, and with thecourt having heard and affirmed the right, the right of subrogation is thenestablished. The sub-obligor will have to discharge his obligation to theobligee, then the corresponding claim and obligation between the obligee andobligor, the obligee and sub-obligor, will be extinguished.
　　　　egardless of whether the obligor is himself exercising his right of claim orthe oblige is exercising his right to subrogation, its effect on thesub-obligor and on the obligor’s claim against the sub-obligor, does not haveany impact on the legal status or interest of the sub-obligor. As such, asub-obligor can make use of whatever right of defence that he is entitled touse against the obligor to subsequently counter against the claim of theobligee.
　　　　
　
　Lastly, with respect to the validity of the obligee’sclaim, he cannot when enforcing his subrogration right, request for an amountthat exceeds the monetary scope of the obligor’s liability. The obligor mustbear the necessary costs for the obligee’s enforcement of subrogration rights.
　　　　
　
　The regime of the right to subrograte is concernedwith balancing the interests of both obligee and obligor, and with protectingthe autonomy of will and the principle of good faith. The original rationale inestablishing the regime for subrogration rights is to protect obligations,stabilize obligatory relationships, insist on the principle of who should claimand who should gain, benefit the obligee when he protects his obligationactively, simplify the procedure for protecting obligations, and raise theefficiency level for protecting obligations. In establishing the regime forsubrogration rights, an important aim of China’s Contract Law is to solveChina’s real and rampant problem of “Three-way debts”.Whether this regime can in fact fulfilthis goal relies on the correct interpretation by academics. Modern experiencesfrom foreign jurisprudence and doctrines also need to be absorbed, togetherwith the use of judicial practice, to give this regime real spirit.

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