China promulgated its first Civil Code in May 2020, which includes seven parts, i.e., General Principles, Real Rights, Contracts, Personality Rights, Marriage and Family, Succession, Liability for Tort, and Supplementary Provisions. The Contracts is its third part.
For related posts on the PRC Civil Code, please click here.
For China Civil Code (Free English Version), please click each part as follow:
Book I General Principles (English, Chinese)
Book II Real Rights (English, Chinese)
Book III Contract (English, Chinese)
Book IV Personality Rights (English, Chinese)
Book V Marriage and Family (English, Chinese)
Book VI Succession (English, Chinese)
Book VII Liability for Tort (English, Chinese)
Before that, China had promulgated Contract Law separately. After the promulgation of the Civil Code, the Contract Law is to be abolished accordingly on 1 Jan. 2021 when the Civil Code enters into force.
“Part III Contract” has 29 chapters in total, which are divided into three subparts: General Provisions, Typical Contracts, and Quasi-contracts.
The “General Provisions” provides for the conclusion, effectiveness, performance, alteration, termination, liability for breach of contracts.
The “Typical Contracts” provides for 18 typical contracts, such as sales contracts, lease contracts, technology contracts, and contracts of partnership.
The “Quasi-contracts” provides for two circumstances: negotiorum gestio and unjust enrichment.
We have selected some noteworthy points as follows:
1. Contracts and applicable laws
A contract is an agreement between civil subjects to establish, change and terminate the civil juristic relationship.
When the contract does not fall under any of the types provided for by the “Typical Contracts” of “Part III Contracts”, the “General Provisions” can be applied to the contract, and the relevant provisions of “Typical Contracts” or the most similar contract-related provisions of other laws can be referred to.
The parties may agree on the applicable law of the contract in accordance with the law. However, Chinese laws shall apply to the contracts to be fulfilled in the territory of China for Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, and Chinese-foreign cooperation in exploring and exploiting natural resources.
2. Conclusion and effectiveness of contracts
The parties may, when making a contract, use written form, verbal form or any other form.
"Written form" means any form which renders the information contained in a contract capable of being reproduced in a tangible form such as a written agreement, a letter, a telegram, a telex, or a facsimile.
Any electronic data that can show, in a tangible form, the contents that it specifies through electronic data exchange or e-mail and can be accessed for reference and used at any time shall be deemed as a written form.
If the parties enter into a contract in the form of a contract instrument, the contract is formed at the time when both parties affix their signatures, fingerprints or seals thereto. A contract legally formed shall become effective upon its formation, except as otherwise provided for by the law or agreed by the parties.
3. Termination of contracts
The parties may agree on the cause for termination of the contract by either party. When the cause occurs, the party with the right to terminate may terminate the contract.
In addition, under any of the following circumstances, the contract may be dissolved unilaterally even if the parties have not so agreed:
(1) It is impossible to achieve the purpose of the contract due to force majeure;
(2) Any party expressly states, or indicates through its conduct, that it will not perform its main debts prior to the expiration of the performance period;
(3) Any party delays in performing its main debts and fails to perform the same within a reasonable period after being urged to do so;
(4) Any party delays the performance of its debts, or has other violations, rendering it impossible to achieve the purpose of the contract;
(5) Other circumstances prescribed by law.
4. Statutory and agreed liability for breach of contract
(1) Statutory liability for breach of contract
Where any party fails to perform its contractual obligations or the performance thereof is not in line with the agreement, it shall bear the liability for breach of contract such as continuous performance, taking remedial measures or compensating for losses.
(2) Agreed liquidated damages or damages
In addition to the statutory liability for breach of contract, the parties may also agree that when one party breaches the contract, it shall pay a certain amount of liquidated damages to the other party as appropriate to the seriousness of the breach, and may also agree on the calculation method of the amount of damages caused by the breach of contract.
If the agreed amount of liquidated damages are lower than the losses caused by the breach of contract, the court or the arbitration institution may increase the amount of liquidated damages at the request of the parties; if the agreed amount of liquidated damages are excessively higher than the losses actually incurred, the court or the arbitration institution may lower them as appropriate at the request of the parties.
The English translation of the PRC Civil Code is currently available for pre-order on China Justice Observer. If you are interested in a pre-order, please contact Meng Yu via e-mail at meng.yu@chinajusticeobserver.com. The PRC Civil Code of 110,123 Chinese words in total are translated into English, and the English translation (estimated at 60,000 words) is priced at US$ 4400. We will provide the English translation and the English-Chinese version within 2 weeks.
Photo by Zain Lee on Unsplash
Contributors: China Laws Portal Team
