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| Contract Law of the People s Republic of China 2006-7-1 17:49:58 |
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Order [1999] No.15 of the President of the People's Republic of
Contract Law of the People's Republic of Ninth National People's Congress on March 15, 1999, and is hereby promulgated, it will come into force as of October 1, 1999.
President of the People's Republic of March 15, 1999
Contract Law of the People's Republic of General Provisions Chapter 1 General Provisions Article 1 This Law is enacted in order to protect the lawful rights and interests of the contracting parties, to maintain social and economic order, and to promote the process of socialist modernization. Article 2 A contract in this Law refers to an agreement among natural persons, legal persons or other organizations as equal parties for the establishment, modification of a relationship involving the civil rights and obligations of such entities. Agreements concerning personal relationships such as marriage, adoption, guardianship, etc. shall be governed by the provisions in other laws. Article 3 Contracting parties shall have equal legal status, and no party may impose its will on the other party. Article 4 The parties have the right to lawfully enter into a contract of their own free will in accordance with the law, and no unit or individual may illegally interfere therewith. Article 5 The parties shall adhere to the principle of fairness in deciding their respective rights and obligations. Article 6 The parties shall observe the principle of honesty and good faith in exercising their rights and performing their obligations. Article 7 In concluding and performing a contract, the parties shall comply with the laws and administrative regulations, respect social ethics, and shall not disrupt the social and economic order or impair the public interests. Article 8 A lawfully established contract shall be legally binding on the parties thereto, each of whom shall perform its own obligations in accordance with the terms of the contract, and no party shall unilaterally modify or terminate the contract. The contract established according to law is protected by law. Chapter 2 Conclusion of Contracts Article 9 In entering into a contract, the parties shall have appropriate capacities for civil rights and civil acts. A party may appoint an agent to enter into a contract on its behalf in accordance with the law. Article 10 The parties may use written, oral or other forms in entering into a contract. A contract shall be in written form if the laws or administrative regulations so provide. A contract shall be concluded in written form if the parties so agree. Article 11 "Written form" refers to a form such as a written contractual agreement, letter, electronic data text(including a telegram, telex, fax, electronic data exchange and e-mail)that can tangibly express the contents contained therein.
Article 12 The contents of a contract shall be agreed upon by the parties, and shall generally contain the following clauses: (1) titles or names and domiciles of the parties; (2) subject matter; (3) quantity; (4) quality; (5) price or remuneration; (6) time limit, place and method of performance; (7) liability for breach of contract; and (8) method to settle disputes. The parties may conclude a contract by reference to a model text of each kind of contract. Article 13 The parties shall conclude a contract in the form of an offer and an acceptance. Article 14 An offer is an expression of an intent to enter into a contract with another person. Such expression of intent shall comply with the following: (1) its contents shall be specific and definite; (2) it indicates that the offeror will be bound by the expression of intent in case of acceptance by the offeree. Article 15 An invitation for offer is an expression of an intent to invite other parties to make offers thereto. Mailed price lists, public notices of auction and tender, prospectuses and commercial advertisements, etc. are invitations for offer. Where the contents of a commercial advertisement meet the requirements for an offer, it shall be regarded as an offer.
Article 16 An offer becomes effective when it reaches the offeree. If a contract is concluded through data-telex, and a recipient designates a specific system to receive the date-telex, the time when the data-telex enters such specific system shall be the time of arrival; if no specific system is appointed, the time when the data-telex first enters any of the recipient's systems shall be regarded as the time of arrival. Article 17 An offer may be withdrawn. The withdrawal notice shall reach the offeree before or at the same time when the offer arrives. Article 18 An offer may be revoked. The revocation notice shall reach the offeree before it has dispatched a notice of acceptance. Article 19 An offer may not be revoked, if (1) the offeror indicates a fixed time for acceptance or otherwise explicitly states that the offer is irrevocable; or (2) the offeree has reasons to rely on the offer as being irrevocable and has made preparation for performing the contact. Article 20 An offer shall lose efficacy under any of the following circumstances: (1) the notice of rejection reaches the offeror; (2) the offeror revokes the offer in accordance with the law; (3) the offeree fails to dispatch an acceptance before the expiration of the time limit for acceptance; (4) the offeree makes substantial changes to the contents of the offer. Article 21 An acceptance is the expression of an intention to by the offeree to assent to the offer. Article 22 The acceptance shall be made in the form of a notice, except where acceptance may be made by an act on the basis of customary business practice or as expressed in the offer. Article 23 An acceptance shall reach the offeror within the time limit prescribed in the offer. Where no time limit is prescribed in the offer, the acceptance shall reach the offeror in accordance with the following provisions: (1) if the offer is made in dialogues, the acceptance shall be made immediately unless otherwise agreed upon by the parties; (2) If the offer is made in forms other than a dialogue, the acceptance shall reach the offeror within a reasonable period of time. Article 24 Where an offer is made by letter or telegram, the time limit for acceptance shall accrue from the date shown in the letter or from the date on which the telegram is handed in for dispatch. If no such date is shown in the letter, it shall accrue from the postmark date on the envelope. Where an offer is made by means of instantaneous communication, such as telephone or facsimile, etc. the time limit for acceptance shall accrue from the moment that the offer reaches the offeree.
Article 25 A contract is established when the acceptance becomes effective. Article 26 An acceptance becomes effective when its notice reaches the offeror. If notice of acceptance is not required, the acceptance shall become effective when an act of acceptance is performed in accordance with transaction practices or as required in the offer. Where a contract is concluded in the form of date-telex, the time of arrival of an acceptance shall be governed by the provisions of Paragraph 2, Article 16 of this Law. Article 27 An acceptance may be withdrawn, but a notice of withdrawal shall reach the offeror before or at the same time when the notice of acceptance reaches the offeror. Article 28 Where an offeree makes an acceptance beyond the time limit for acceptance, the acceptance shall be a new offer except that the offeror promptly informs the offeree of the effectiveness of the said acceptance. Article 29 If the offeree dispatched the acceptance within the time limit specified for acceptance, and under normal circumstances the acceptance would have reached the offeror in due time, but due to other reasons the acceptance reaches the offeror after the time limit for acceptance has expired, such acceptance shall be effective, unless the offeror notifies the offeree in a timely manner that it does not accept the acceptance due to the failure of the acceptance to arrive within the time limit. Article 30 The contents of an acceptance shall comply with those of the offer. If the offeree substantially modifies the contents of the offer, it shall constitute a new offer. The modification relating to the subject matter, quality, quantity, price or remuneration, time or place or method of performance, liabilities for breach of contract and method of dispute resolution, etc. shall constitute the substantial modification of an offer. Article 31 If the acceptance does not substantially modifies the contents of the offer, it shall be effective, and the contents of the contract shall be subject to those of the acceptance, except as rejected promptly by the offeror or indicated in the offer that an acceptance may not modify the offer at all. Article 32 Where the parties conclude a contract in written form, the contract is established when it is signed or sealed by the parties. Article 33 Where the parties conclude the contract in the form of letters or data-telex, etc., one party may request to sign a letter of confirmation before the conclusion of the contract. The contract shall be established at the time when the letter of confirmation is signed. Article 34 The place of effectiveness of an acceptance shall be the place of the establishment of the contract. If the contract is concluded in the form of data-telex, the main business place of the recipient shall be the place of establishment. If the recipient does not have a main business place, its habitual residence shall be considered to be the place of establishment. Where the parties agree otherwise, such agreement shall apply.
Article 35 Where the parties conclude a contract in written form, the place where both parties sign or affix their seals on the contract shall be the place of establishment. Article 36 Where a contract is to be concluded in written form as required by relevant laws and administrative regulations or as agreed by the parties, and the parties failed to conclude the contract in written form, but one party has performed the principal obligation and the other party has accepted it, the contract is established. Article 37 Where a contract is to be concluded in written form, if one party has performed its principal obligation and the other party has accepted it before signing or sealing of the contract, the contract is established. Article 38 Where the State has issued a mandatory plan or a State purchasing order based on necessity, the relevant legal persons and the other organizations shall conclude a contract between them in accordance with the rights and obligations as stipulated by the relevant laws and administrative regulations. Article 39 Where standard terms are adopted in concluding a contract, the party supplying the standard terms shall define the rights and obligations between the parties abiding by the principle of fairness, and shall inform the other party to note the exclusion or restriction of its liabilities in a reasonable way, and shall explain the standard terms upon request by the other party. Standard terms are clauses that are prepared in advance for general and repeated use by one party, and which are not negotiated with the other party when the contract in concluded. Article 40 When standard terms are under the circumstances stipulated in Articles 52 and 53 of this Law, or the party which supplies the standard terms exempts itself from its liabilities, increases the liabilities of the other party, and deprives the material rights of the other party, the terms shall be invalid. Article 41 If a dispute over the understanding of the standard terms occurs, it shall be interpreted in accordance with common understanding. Where there are two or more kinds of interpretation, an interpretation unfavorable to the party supplying the standard terms shall prevail. Where the standard terms are inconsistent with non-standard terms, the latter shall prevail. Article 42 The party shall be liable for damage if it is under one of the following circumstances in concluding a contract and thus causing losses to the other party: (1) pretending to conclude a contract, and negotiating in bad faith; (2) deliberately concealing important facts relating to the conclusion of the contract or providing false information; (3) performing other acts which violate the principle of good faith.
Article 43 A trade secret the parties learn in concluding a contract shall not be disclosed or improperly used, no matter the contract is established or not. If the party discloses or improperly uses such trade secret and thus causing loss to the other party, it shall be liable for damages. Chapter 3 Validity of Contracts Article 44 The contract established according to law becomes effective upon its establishment. With regard to contracts that are subject to approval or registration as stipulated by relevant laws or administrative regulations, the provisions thereof shall be followed. Article 45 The parties may agree on that the effectiveness of a contract be subject to certain conditions. A contract whose effectiveness is subject to certain conditions shall become effective when such conditions are accomplished. The contract with dissolving conditions shall become invalid when such conditions are satisfied. If a party improperly prevent the satisfaction of a condition for its own interests, the condition shall be regarded as having been accomplished. If a party improperly facilitates the satisfaction of a condition, such condition shall be regarded as not to have been satisfied. Article 46 The parties may agree on a conditional time period as to the effectiveness of the contract. A contract subject to an effective time period shall come into force when the period expires. A contract with termination time period shall become invalid when the period expires. Article 47 A contract concluded by a person with limited civil capacity of conduct shall be effective after being ratified afterwards by the person's statutory agent, but a pure profit-making contract or a contract concluded which is appropriate to the person's age, intelligence or mental health conditions need not be ratified by the person's statutory agent. The counterpart may urge the statutory agent to ratify the contract within one month. It shall be regarded as a refusal of ratification that the statutory agent does not make any expression. A bona fide counterpart has the right to withdraw it before the contract is ratified. The withdrawal shall be made by means of notice. Article 48 A contract concluded by an actor who as no power of agency, who oversteps the power of agency, or whose power of agency has expired and yet concludes it on behalf of the principal, shall have no legally binding force on the principal without ratification by the principal, and the actor shall be held liable. The counterpart may urge the principal to ratify it within one month. It shall be regarded as a refusal of ratification that the principal does not make any expression. A bona fide counterpart has the right to withdraw it before the contract is ratified. The withdrawal shall be made by means of notice. Article 49 If an actor has no power of agency, oversteps the power of agency, or the power of agency has expired and yet concludes a contract in the principal's name, and the counterpart has reasons to trust that the actor has the power of agency, the act of agency shall be effective. Article 50 Where a statutory representative or a responsible person of a legal person or other organization oversteps his/her power and concludes a contract, the representative act shall be effective except that the counterpart knows or ought to know that he/she is overstepping his/her powers. Article 51 Where a person having no right to disposal of property disposes of other persons' properties, and the principal ratifies the act afterwards or the person without power of disposal has obtained the power after concluding a contract, the contract shall be valid.
Article 52 A contract shall be null and void under any of the following circumstances: (1) a contract is concluded through the use of fraud or coercion by one party to damage the interests of the State; (2) malicious collusion is conducted to damage the interests of the State, a collective or a third party; (3) an illegitimate purpose is concealed under the guise of legitimate acts; (4) damaging the public interests; (5) violating the compulsory provisions of laws and administrative regulations. Article 53 The following exception clauses in a contract shall be null and void: (1) those that cause personal injury to the other party; (2) those that cause property damages to the other party as result of deliberate intent or gross negligence. Article 54 A party shall have the right to request the people's court or an arbitration institution to modify or revoke the following contracts: (1) those concluded as a result of significant misconception; (2) those that are obviously unfair at the time when concluding the contract. If a contract is concluded by one party against the other party's true intentions through the use of fraud, coercion, or exploitation of the other party's unfavorable position, the injured party shall have the right to request the people's court or an arbitration institution to modify or revoke it. Where a party requests for modification, the people's court or the arbitration institution may not revoke the contract. Article 55 The right to revoke a contract shall extinguish under any of the following circumstances: (1) a party having the right to revoke the contract fails to exercise the right within one year from the day that it knows or ought to know the revoking causes; (2) a party having the right to revoke the contract explicitly expresses or conducts an act to waive the right after it knows the revoking causes. Article 56 A contract that is null and void or revoked shall have no legally binding force ever from the very beginning. If part of a contract is null and void without affecting the validity of the other parts, the other parts shall still be valid.
Article 57 If a contract is null and void, revoked or terminated, it shall not affect the validity of the dispute settlement clause which is independently existing in the contract. Article 58 The property acquired as a result of a contract shall be returned after the contract is confirmed to be null and void or has been revoked; where the property can not be returned or the return is unnecessary, it shall be reimbursed at its estimated price. The party at fault shall compensate the other party for losses incurred as a result therefrom. If both parties are fault, each party shall respectively be liable. Article 59 If the parties have maliciously conducted collusion to damage the interests of the State, a collective or a third party, the property thus acquired shall be turned over to the State or returned to the collective or the third party. Chapter 4 Performance of Contracts Article 60 Each party shall fully perform its own obligations as agreed upon. The parties shall abide by the principle of good faith, and perform obligations of notification, assistance, and confidentiality, etc. in accordance with the nature and purpose of the contract and the transaction practice. Article 61 Where, after the contract becomes effective, there is no agreement in the contract between the parties on such contents as quality, price or remuneration, or place of performance etc., or such agreement is ambiguous, the parties may agree upon supplementary terms through consultation; if a supplementary agreement cannot be reached, such terms shall be determined in accordance with the relevant provisions of the contract or the transaction practices. Article 62 Where certain contents agreed upon by the parties in the contract are ambiguous and cannot be determined in accordance with the provisions in Article 61 of this Law, the following provisions shall be applied: (1) if quality requirement is not clear, performance shall be in accordance with the state standard or industry standard; absent any state or industry standard, performance shall be in accordance with the customary standard or any particular standard consistent with the purpose of the contract; (2) if price or remuneration is not clear, performance shall be in accordance with the prevailing market price at the place of performance at the time the contract was concluded, and if adoption of a price commissioned by the government or based on government issued pricing guidelines is required by law, such requirement applies; (3) where the place of performance is not clear, if the obligation is payment of money, performance shall be at the place where the payee is located; if the obligation is delivery of immovable property, performance shall be at the place where the immovable property is located; for any other subject matter, performance shall be effected at the place of location of the party fulfilling the obligations. (4) if the time of performance is not clear, the obligor may perform, and the obligee may require performance, at any time, provided that the other party shall be given the time required for preparation; (5) if the method of performance is not clear, performance shall be rendered in a manner which is conducive to realizing the purpose of the contract; (6) if the responsibility for the expenses of performance is not clear, the party fulfilling the obligations shall bear the expenses. Article 63 Where the government-fixed price or government-directed price is followed in a contract, if the said price is readjusted within the time limit for delivery as stipulated in the contract, the payment shall be calculated according to the price at the time of delivery. Where a party delays in delivering the subject matter, the original price shall be adopted if the price rises; and the new price shall be adopted if the price falls. Where a party delays in taking delivery of the subject matter or making payment, the new price shall be adopted if the price rises, and the original price shall be adopted if the price falls.
Article 64 Where the parties agree that the obligor shall perform the obligations to a third party, and the obligor fails to perform its obligations to such third party or its performance of the obligations is not in conformity with the agreement, the obligor shall be liable to the obligee for breach of contract. Article 65 Where the parties agree that a third party performs the obligations to the obligee, and the third party fails to perform the obligations or the performance is not in conformity with the agreement, the obligor shall be liable to the obligee for breach of contract. Article 66 Where both parties have obligations toward one another and there is no order of priority in respect of the performance of obligations, the parties shall perform the obligations simultaneously. Each party has the right to reject any demand by the other party for performance prior to the performance by the other party. If the performance of the obligations of the party who is to perform first is not in conformity with the agreement, the party who is perform later has the right to reject the other party's demand for corresponding performance. Article 67 Where both parties have obligations toward each other and there is an order of priority in respect of the performance, and the party who is to perform first fails to perform, the party who is to perform later has the right to reject the other party's demand for performance. If the performance of the obligations of the party who is to perform first is not in conformity with the agreement, the party who is to perform later has the right to reject the other party's demand for corresponding performance. Article 68 The party required to perform first may suspend its performance if it has conclusive evidence showing that the other party is under any of the following circumstances: (1) its business has seriously deteriorated; (2) it has engaged in transfer of assets or withdrawal of funds for the purpose of evading debts; (3) it has lost its business creditworthiness; (4) it is in any other circumstance which will or may cause it to lose its ability to perform. Where a party suspends performance without conclusive evidence, it shall be liable for breach of contract. Article 69 If a party suspends its performance in accordance with the provisions of Article 68 of this Law, it shall timely notify the other party. If the other party provides appropriate assurance for its performance, the party shall resume performance. After performance was suspended, if the other party fails to regain its ability to perform and fails to provide appropriate assurance within a reasonable time, the suspending party may terminate the contract. Article 70 Where the obligee fails to notify the obligor of its separation, merger, or change of the domicile, thereby making it difficult for the obligor to perform its obligations, the obligor may suspend its performance or escrow the subject matter. Article 71 The obligee may reject the obligor's advance performance of its obligations, except that the advance performance does not harm the obligee's interests. Any additional expense incurred by the obligee due to the obligor's advance performance of its obligations shall be borne by the obligor.
Article 72 An obligee may reject the obligor's partial performance, except that the partial performance of its obligations does not harm the obligee's interests. Any additional expense incurred by the obligee due to the obligor's partial performance of its obligations shall be borne by the obligor. Article 73 Where the obligor is remiss in exercising its due creditor's right, thereby harming the obligee's interests, the obligee may petition the People's Court for subrogation in its own name, except that the creditor's right exclusively belongs to the obligor. The extent to which the subrogation rights can be exercised is limited to the obligee's rights. The expenses necessary for the obligee to exercise such subrogation rights shall be borne by the obligor. Article 74 Where the obligor waives its creditor's right against a third party that is due or assigns its property without reward, thereby harming the obligee's interests, the obligee may petition the People's Court for cancellation of the obligor's act. Where the obligor assigns its property at a low price which is manifestly unreasonable, thereby harming the obligee's interests, and the assignee is aware of the situation, the obligee may also petition the People's Court for cancellation of the obligor's act. The extent to which the right to cancel can be exercised is limited to the rights of the obligee. The expenses necessary for the obligee to exercise the right to cancel shall be borne by the obligor. Article 75 The right to cancel shall be exercised within one year form the date the obligee knows or should have known of the matter for cancellation. Such right to cancel shall lapse if the obligee fails to exercise such rights within five years from the date of the occurrence of such act. Article 76 Once a contract becomes effective, a party may not refuse to perform its obligations thereunder due to a change in its name, or its legal representative, the person in charge, or the person handling the contract. Chapter 5 Modification and Assignment of Contracts Article 77 A contract may be modified if the parties reach a consensus through consultation. If the laws or administrative regulations so provide, approval and registration procedures for such modification shall be gone through in accordance with such provisions. Article 78 Where an agreement by the parties on the contents of a modification is ambiguous, the contract shall be presumed as not having been modified. Article 79 The obligee may assign its rights under a contract, in whole or in part, to a third party, except under the following circumstances: (1) such rights may not be assigned in light of the nature of the contract; (2) such rights may not be assigned according to the agreement between the parties; (3) such rights may not be assigned according to the provisions of the laws. Article 80 Where the obligee assigns its rights, it shall notify the obligor. Such assignment will have no effect on the obligor without notice thereof. A notice by the obligee to assign its rights shall not be revoked, unless such revocation is consented to by the assignee. Article 81 Where the obligee assigns its right, the assignee shall acquire the collateral rights related to the principal rights, except that the collateral rights exclusively belong to the obligee.
Article 82 Upon receipt of the notice of assignment of rights, the obligor may assert against the assignee any defenses it has against the assignor. Article 83 Upon receipt by the obligor of the notice of assignment of rights, the obligor shall have vested rights against the assignor, and if the rights of the obligor vest prior to or at the same time as the assigned rights, the obligor may claim an offset against the assignee. Article 84 Where the obligor delegates its obligations under a contract in whole or in part to a third party, such delegation shall be subject to the consent of the obligee. Article 85 Where the obligor delegates its obligation, the new obligor may exercise any defense that the original obligor had against the obligee. Article 86 Where the obligor delegates its obligation, the new obligor shall assume the incidental obligations related to the main obligations, except that the obligations exclusively belong to the original obligor. Article 87 Where the laws or administrative regulations stipulate that the assignment of rights or transfer of obligations shall undergo approval or registration procedures, such provisions shall be followed. Article 88 Upon the consent of the other party, one party may transfer its rights together with its obligations under contract to a third party. |