CONTRACT LAW OF
THE PEOPLE'S REPUBLIC OF CHINA
Adopted and
Promulgated by the Second Session of the Ninth
National People's Congress on March 15, 1999.
Translated &
Compiled by John Jiang & Henry Liu
GENERAL PRINCIPLES
Chapter One:
General Provisions
Article 1 Purpose
This Law is
formulated in order to protect the lawful rights and
interests of contract parties, to safeguard social
and economic order, and to promote socialist
modernization.
Article 2
Definition of Contract; Exclusions
For purposes of
this Law, a contract is an agreement between natural
persons, legal persons or other organizations with
equal standing, for the purpose of establishing,
altering, or discharging a relationship of civil
rights and obligations.
An agreement
concerning any personal relationship such as
marriage, adoption, guardianship, etc. shall be
governed by other applicable laws.
Article 3 Equal
Standing of Parties
Contract parties
enjoy equal legal standing and neither party may
impose its will on the other party.
Article 4 Right to
Enter into Contract Voluntarily
A party is
entitled to enter into a contract voluntarily under
the law, and no entity or individual may unlawfully
interfere with such right.
Article 5 Fairness
The parties shall
abide by the principle of fairness in prescribing
their respective rights and obligations.
Article 6 Good
Faith
The parties shall
abide by the principle of good faith in exercising
their rights and performing their obligations.
Article 7 Legality
In concluding or
performing a contract, the parties shall abide by
the relevant laws and administrative regulations, as
well as observe social ethics, and may not disrupt
social and economic order or harm the public
interests.
Article 8 Binding
Effect; Legal Protection
A lawfully formed
contract is legally binding on the parties. The
parties shall perform their respective obligations
in accordance with the contract, and neither party
may arbitrarily amend or terminate the contract.
A lawfully formed
contract is protected by law.
Chapter Two:
Formation of Contracts
Article 9
Capacity; Contract through Agent
In entering into a
contract, the parties shall have the appropriate
capacities for civil rights and civil acts.
A party may
appoint an agent to enter into a contract on its
behalf under the law.
Article 10 Forms
of Contract; Writing Requirement
A contract may be
made in a writing, in an oral conversation, as well
as in any other form.
A contract shall
be in writing if a relevant law or administrative
regulation so requires. A contract shall be in
writing if the parties have so agreed.
Article 11
Definition of Writing
A writing means a
memorandum of contract, letter or electronic message
(including telegram, telex, facsimile, electronic
data exchange and electronic mail), etc. which is
capable of expressing its contents in a tangible
form.
Article 12 Terms
of Contract
The terms of a
contract shall be prescribed by the parties, and
generally include the following:
(i) names of the
parties and the domiciles thereof;
(ii) subject
matter;
(iii) quantity;
(iv) quality;
(v) price or
remuneration;
(vi) time, place
and method of performance;
(vii) liabilities
for breach of contract;
(viii) method of
dispute resolution.
The parties may
enter into a contract by referencing a model
contract for the relevant contract category.
Article 13
Offer-Acceptance
A contract is
concluded by the exchange of an offer and an
acceptance.
Article 14
Definition of Offer
An offer is a
party's manifestation of intention to enter into a
contract with the other party, which shall comply
with the following:
(i) Its terms are
specific and definite;
(ii) It indicates
that upon acceptance by the offeree, the offeror
will be bound thereby.
Article 15
Invitation to Offer
An invitation to
offer is a party's manifestation of intention to
invite the other party to make an offer thereto. A
delivered price list, announcement of auction, call
for tender, prospectus, or commercial advertisement,
etc. is an invitation to offer.
A commercial
advertisement is deemed an offer if its contents
meet the requirements of an offer.
Article 16
Effectiveness of Offer, Offer through Electronic
Message
An offer becomes
effective when it reaches the offeree.
When a contract is
concluded by the exchange of electronic messages, if
the recipient of an electronic message has
designated a specific system to receive it, the time
when the electronic message enters into such
specific system is deemed its time of arrival; if no
specific system has been designated, the time when
the electronic message first enters into any of the
recipient's systems is deemed its time of arrival.
Article 17
Withdrawal of Offer
An offer may be
withdrawn. The notice of withdrawal shall reach the
offeree before or at the same time as the offer.
Article 18
Revocation of Offer
An offer may be
revoked. The notice of revocation shall reach the
offeree before it has dispatched a notice of
acceptance.
Article 19
Irrevocable Offer
An offer may not
be revoked:
(i) if it
expressly indicates, whether by stating a fixed time
for acceptance or otherwise, that it is irrevocable;
(ii) if the
offeree has reason to regard the offer as
irrevocable, and has undertaken preparation for
performance.
Article 20
Extinguishment of Offer
An offer is
extinguished in any of the following circumstances:
(i) The notice of
rejection reaches the offeror;
(ii) The offeror
lawfully revokes the offer;
(iii) The offeree
fails to dispatch its acceptance at the end of the
period for acceptance;
(iv) The offeree
makes a material change to the terms of the offer.
Article 21
Definition of Acceptance
An acceptance is
the offeree's manifestation of intention to assent
to an offer.
Article 22 Mode of
Acceptance; Acceptance by Conduct
An acceptance
shall be manifested by notification, except where it
may be manifested by conduct in accordance with the
relevant usage or as indicated in the offer.
Article 23 Timely
Dispatch of Acceptance
An acceptance
shall reach the offeror within the period prescribed
in the offer.
Where the offer
does not prescribe a period for acceptance, the
acceptance shall reach the offeror as follows:
(i) Where the
offer is made orally, the acceptance shall be
dispatched immediately, unless otherwise agreed by
the parties;
(ii) Where the
offer is made in a non-oral manner, the acceptance
shall reach the offeror within a reasonable time.
Article 24
Commencement of the Period for Acceptance
Where an offer is
made by a letter or a telegram, the period for
acceptance commences on the date shown on the letter
or the date on which the telegram is handed in for
dispatch. If the letter does not specify a date, the
period commences on the posting date stamped on the
envelop. Where the offer is made through an
instantaneous communication device such as telephone
or facsimile, etc., the period for acceptance
commences once the offer reaches the offeree.
Article 25
Contract Formed upon Effectiveness of Acceptance
A contract is
formed once the acceptance becomes effective.
Article 26
Effectiveness of Acceptance
A notice of
acceptance becomes effective once it reaches the
offeror. Where the acceptance does not require
notification, it becomes effective once an act of
acceptance is performed in accordance with the
relevant usage or as required by the offer.
Where a contract
is concluded by the exchange of electronic messages,
the time of arrival of the acceptance shall be
governed by Paragraph 2 of Article 16 hereof.
Article 27
Withdrawal of Acceptance
An acceptance may
be withdrawn. The notice of withdrawal shall reach
the offeror before or at the same time as the
acceptance.
Article 28 Late
Acceptance
An acceptance
dispatched by the offeree after expiration of the
period for acceptance constitutes a new offer,
unless the offeror timely advises the offeree that
the acceptance is valid.
Article 29 Delayed
Transmission of Acceptance
If the offeree
dispatched its acceptance within the period for
acceptance, and the acceptance, which would
otherwise have reached the offeror in due time under
normal circumstances, reaches the offeror after
expiration of the period for acceptance due to any
other reason, the acceptance is valid, unless the
offeror timely advises the offeree that the
acceptance has been rejected on grounds of the
delay.
Article 30
Acceptance Containing Material Change
The terms of the
acceptance shall be identical to those of the offer.
A purported acceptance dispatched by the offeree
which materially alters the terms of the offer
constitutes a new offer. A change in the subject
matter, quantity, quality, price or remuneration,
time, place and method of performance, liabilities
for breach of contract or method of dispute
resolution is a material change to the terms of the
offer.
Article 31
Acceptance Containing Non-material Changes
An acceptance
containing nonmaterial changes to the terms of the
offer is nevertheless valid and the terms thereof
prevail as the terms of the contract, unless the
offeror timely objects to such changes or the offer
indicated that acceptance may not contain any change
to the terms thereof.
Article 32 Time of
Formation in Case of Memorandum of Contract
Where the parties
enter into a contract by a memorandum of contract,
the contract is formed when it is signed or sealed
by the parties.
Article 33 Time of
Formation in Case of Letters or Electronic Messages;
Confirmation Letter
Where the parties
enter into a contract by the exchange of letters or
electronic messages, one party may require execution
of a confirmation letter before the contract is
formed. The contract is formed upon execution of the
confirmation letter.
Article 34 Place
of Formation; Electronic Messages
The place where
the acceptance becomes effective is the place of
formation of a contract.
Where a contract
is concluded by the exchange of electronic messages,
the recipient's main place of business is the place
of formation of the contract; if the recipient does
not have a main place of business, its habitual
residence is the place of formation of the contract.
If the parties have agreed otherwise, such agreement
prevails.
Article 35 Place
of Formation in Case of Memorandum of Contract
Where a contract
is concluded by a memorandum of contract, its place
of formation is the place where the parties sign or
seal the contract.
Article 36 Effect
of Failure to Conclude Contract in Writing
Where a contract
is to be concluded by a writing as required by the
relevant law or administrative regulation or as
agreed by the parties, if the parties failed to
conclude the contract in writing but one party has
performed its main obligation and the other party
has accepted the performance, the contract is
formed.
Article 37 Effect
of Failure to Sign in Case of Memorandum of Contract
Where a contract
is to be concluded by a memorandum of contract, if
prior to signing or sealing of the contract, one
party has performed its main obligation and the
other party has accepted the performance, the
contract is formed.
Article 38
Contract under State Mandatory Plan
Where the state
has, in light of its requirements, issued a
mandatory plan or state purchase order, the relevant
legal persons and other organizations shall enter
into a contract based on the rights and obligations
of the parties prescribed by the relevant laws and
administrative regulations.
Article 39
Standard Terms; Duty to Call Attention
Where a contract
is concluded by way of standard terms, the party
supplying the standard terms shall abide by the
principle of fairness in prescribing the rights and
obligations of the parties and shall, in a
reasonable manner, call the other party's attention
to the provision(s) whereby such party's liabilities
are excluded or limited, and shall explain such
provision(s) upon request by the other party.
Standard terms are
contract provisions which were prepared in advance
by a party for repeated use, and which are not
negotiated with the other party in the course of
concluding the contract.
Article 40
Invalidity of Certain Standard Terms
A standard term is
invalid if it falls into any of the circumstances
set forth in Article 52 and Article 53 hereof, or if
it excludes the liabilities of the party supplying
such term, increases the liabilities of the other
party, or deprives the other party of any of its
material rights.
Article 41 Dispute
Concerning Construction of Standard Term
In case of any
dispute concerning the construction of a standard
term, such term shall be interpreted in accordance
with common sense. If the standard term is subject
to two or more interpretations, it shall be
interpreted against the party supplying it. If a
discrepancy exists between the standard term and a
non-standard term, the non-standard term prevails.
Article 42
Pre-contract Liabilities
Where in the
course of concluding a contract, a party engaged in
any of the following conducts, thereby causing loss
to the other party, it shall be liable for damages:
(i) negotiating in
bad faith under the pretext of concluding a
contract;
(ii) intentionally
concealing a material fact relating to the
conclusion of the contract or supplying false
information;
(iii) any other
conduct which violates the principle of good faith.
Article 43 Trade
Secrets; Liability for Disclosure or Improper Use
A party may not
disclose or improperly use any trade secret which it
became aware of in the course of negotiating a
contract, regardless of whether a contract is
formed. If the party disclosed or improperly used
such trade secret, thereby causing loss to the other
party, it shall be liable for damages.
Chapter Three:
Validity of Contracts
Article 44
Effectiveness of Contract
A lawfully formed
contract becomes effective upon its formation.
Where
effectiveness of a contract is subject to any
procedure such as approval or registration, etc. as
required by a relevant law or administrative
regulation, such provision applies.
Article 45
Conditions Precedent; Conditions Subsequent;
Improper Impairment or Facilitation
The parties may
prescribe that effectiveness of a contract be
subject to certain conditions. A contract subject to
a condition precedent becomes effective once such
condition is satisfied. A contract subject to a
condition subsequent is extinguished once such
condition is satisfied.
Where in order to
further its own interests, a party improperly
impaired the satisfaction of a condition, the
condition is deemed to have been satisfied; where a
party improperly facilitated the satisfaction of a
condition, the condition is deemed not to have been
satisfied.
Article 46
Contract Term
The parties may
prescribe a term for a contract. A contract subject
to a time of commencement becomes effective at such
time. A contract subject to a time of expiration is
extinguished at such time.
Article 47
Contract by Person with Limited Capacity
A contract
concluded by a person with limited capacity for
civil act is valid upon ratification by the legal
agent thereof, provided that a contract from which
such person accrues benefits only or the conclusion
of which is appropriate for his age, intelligence or
mental health does not require ratification by his
legal agent.
The other party
may demand that the legal agent ratify the contract
within one month. If the legal agent fails to
manifest his intention, he is deemed to have
declined to ratify the contract. Prior to
ratification of the contract, the other party in
good faith is entitled to cancel the contract.
Cancellation shall be effected by notification.
Article 48
Contract by Unauthorized Agent
Absent
ratification by the principal, a contract concluded
on his behalf by a person who lacked agency
authority, who acted beyond his agency authority or
whose agency authority was extinguished is not
binding upon the principal unless ratified by him,
and the person performing such act is liable.
The other party
may demand that the principal ratify the contract
within one month. Where the principal fails to
manifest his intention, he is deemed to have
declined to ratify the contract. Prior to
ratification of the contract, the other party in
good faith is entitled to cancel the contract.
Cancellation shall be effected by notification.
Article 49
Contract by Person with Apparent Agency Authority
Where the person
lacking agency authority, acting beyond his agency
authority, or whose agency authority was
extinguished concluded a contract in the name of the
principal, if it was reasonable for the other party
to believe that the person performing the act had
agency authority, such act of agency is valid.
Article 50
Contract Executed by Legal Representative
Where the legal
representative or the person-in-charge of a legal
person or an organization of any other nature
entered into a contract acting beyond his scope of
authority, unless the other party knew or should
have known that he was acting beyond his scope of
authority, such act of representation is valid.
Article 51
Unauthorized Disposal of Property through Contract
Where a piece of
property belonging to another person was disposed of
by a person without the power to do so, such
contract is nevertheless valid once the person with
the power to its disposal has ratified the contract,
or if the person lacking the power to dispose of it
when the contract was concluded has subsequently
acquired such power.
Article 52
Invalidating Circumstances
A contract is
invalid in any of the following circumstances:
(i) One party
induced conclusion of the contract through fraud or
duress, thereby harming the interests of the state;
(ii) The parties
colluded in bad faith, thereby harming the interests
of the state, the collective or any third party;
(iii) The parties
intended to conceal an illegal purpose under the
guise of a legitimate transaction;
(iv) The contract
harms public interests;
(v) The contract
violates a mandatory provision of any law or
administrative regulation.
Article 53
Invalidity of Certain Exculpatory Provisions
The following
exculpatory provisions in a contract are invalid:
(i) excluding one
party's liability for personal injury caused to the
other party;
(ii) excluding one
party's liability for property loss caused to the
other party by its intentional misconduct or gross
negligence.
Article 54
Contract Subject to Amendment or Cancellation
Either of the
parties may petition the People's Court or an
arbitration institution for amendment or
cancellation of a contract if:
(i) the contract
was concluded due to a material mistake;
(ii) the contract
was grossly unconscionable at the time of its
conclusion.
If a party induced
the other party to enter into a contract against its
true intention by fraud or duress, or by taking
advantage of the other party's hardship, the
aggrieved party is entitled to petition the People's
Court or an arbitration institution for amendment or
cancellation of the contract.
Where a party
petitions for amendment of the contract, the
People's Court or arbitration institution may not
cancel the contract instead.
Article 55
Extinguishment of Cancellation Right
A party's
cancellation right is extinguished in any of the
following circumstances:
(i) It fails to
exercise the cancellation right within one year,
commencing on the date when the party knew or should
have known the cause for the cancellation;
(ii) Upon becoming
aware of the cause for cancellation, it waives the
cancellation right by express statement or by
conduct.
Article 56 Effect
of Invalidation or Cancellation; Partial
Invalidation or Cancellation
An invalid or
canceled contract is not legally binding ab initio.
Where a contract is partially invalid, and the
validity of the remaining provisions thereof is not
affected as a result, the remaining provisions are
nevertheless valid.
Article 57
Independence of Dispute Resolution Provision
The invalidation,
cancellation or discharge of a contract does not
impair the validity of the contract provision
concerning the method of dispute resolution, which
exists independently in the contract.
Article 58
Remedies in Case of Invalidation or Cancellation
After a contract
was invalidated or canceled, the parties shall make
restitution of any property acquired thereunder;
where restitution in kind is not possible or
necessary, allowance shall be made in money based on
the value of the property. The party at fault shall
indemnify the other party for its loss sustained as
a result. Where both parties were at fault, the
parties shall bear their respective liabilities
accordingly.
Article 59
Remedies in Case of Collusion in Bad Faith
Where the parties
colluded in bad faith, thereby harming the interests
of the state, the collective or a third person, any
property acquired as a result shall be turned over
to the state or be returned to the collective or the
third person.
Chapter Four:
Performance of Contracts
Article 60 Full
Performance; Performance in Good Faith
The parties shall
fully perform their respective obligations in
accordance with the contract.
The parties shall
abide by the principle of good faith, and perform
obligations such as notification, assistance, and
confidentiality, etc. in light of the nature and
purpose of the contract and in accordance with the
relevant usage.
Article 61
Indeterminate Terms; Supplementary Agreement
If a term such as
quality, price or remuneration, or place of
performance etc. was not prescribed or clearly
prescribed, after the contract has taken effect, the
parties may supplement it through agreement; if the
parties fail to reach a supplementary agreement,
such term shall be determined in accordance with the
relevant provisions of the contract or in accordance
with the relevant usage.
Article 62 Gap
Filling
Where a relevant
term of the contract was not clearly prescribed, and
cannot be determined in accordance with Article 61
hereof, one of the following provisions applies:
(i) If quality
requirement was not clearly prescribed, 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;
(ii) If price or
remuneration was not clearly prescribed, 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
mandated by the government or based on government
issued pricing guidelines is required by law, such
requirement applies;
(iii) Where the
place of performance was not clearly prescribed, 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 at the place where the
obligor is located;
(iv) If the time
of performance was not clearly prescribed, 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;
(v) If the method
of performance was not clearly prescribed,
performance shall be rendered in a manner which is
conducive to realizing the purpose of the contract;
(vi) If the party
responsible for the expenses of performance was not
clearly prescribed, the obligor shall bear the
expenses.
Article 63
Performance at Government Mandated Price
Where a contract
is to be implemented at a price mandated by the
government or based on government issued pricing
guidelines, if the government adjusts the price
during the prescribed period of delivery, the
contract price shall be the price at the time of
delivery. Where a party delays in delivering the
subject matter, the original price applies if the
price has increased, and the new price applies if
the price has decreased. Where a party delays in
taking delivery or making payment, the new price
applies if the price has increased, and the original
price applies if the price has decreased.
Article 64
Performance toward a Third Person
Where the parties
prescribed that the obligor render performance to a
third person, if the obligor fails to render its
performance to the third person, or rendered
non-conforming performance, it shall be liable to
the obligee for breach of contract.
Article 65
Performance by a Third Person
Where the parties
prescribed that a third person render performance to
the obligee, if the third person fails to perform or
rendered non-conforming performance, the obligor
shall be liable to the obligee for breach of
contract.
Article 66
Simultaneous Performance
Where the parties
owe performance toward each other and there is no
order of performance, the parties shall perform
simultaneously. Prior to performance by the other
party, one party is entitled to reject its
requirement for performance. If the other party
rendered non-conforming performance, one party is
entitled to reject its corresponding requirement for
performance.
Article 67
Consecutive Performance
Where the parties
owe performance toward each other and there is an
order of performance, prior to performance by the
party required to perform first, the party who is to
perform subsequently is entitled to reject its
requirement for performance. If the party required
to perform first rendered non-conforming
performance, the party who is to perform
subsequently is entitled to reject its corresponding
requirement for performance.
Article 68 Right
to Suspend Performance
The party required
to perform first may suspend its performance if it
has conclusive evidence establishing that the other
party is in any of the following circumstances:
(i) Its business
has seriously deteriorated;
(ii) It has
engaged in transfer of assets or withdrawal of funds
for the purpose of evading debts;
(iii) It has lost
its business creditworthiness;
(iv) 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
Notification upon Suspension of Performance;
Termination
If a party
suspends its performance in accordance with Article
68 hereof, 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
Difficulty in Rendering Performance Due to
Combination
Where after
effecting combination, division, or change of
domicile, the obligee failed to notify the obligor,
thereby making it difficult to render performance,
the obligor may suspend its performance or place the
subject matter in escrow.
Article 71 Right
to Reject Early Performance; Exception
The obligee may
reject the obligor's early performance, except where
such early performance does not harm the obligee's
interests.
Any additional
expense incurred by the obligee due to the obligor's
early performance shall be borne by the obligor.
Article 72 Right
to Reject Partial Performance; Exception
An obligee may
reject the obligor's partial performance, except
where such partial performance does not harm the
obligee's interests.
Any additional
expense incurred by the obligee due to the obligor's
partial performance shall be borne by the obligor.
Article 73
Subrogation; Limitation
Where the obligor
delayed in exercising its creditor's right against a
third person that was due, thereby harming the
obligee, the obligee may petition the People's Court
for subrogation, except where such creditor's right
is exclusively personal to the obligor.
The scope of
subrogation is limited to the extent of the
obligee's right to performance. The necessary
expenses for subrogation by the obligee shall be
borne by the obligor.
Article 74
Obligee's Right to Cancel Manifestly Unreasonable
Act by Obligor
Where the obligor
waived its creditor's right against a third person
that was due or assigned its property without
reward, thereby harming the obligee, the obligee may
petition the People's Court for cancellation of the
obligor's act. Where the obligor assigned its
property at a low price which is manifestly
unreasonable, thereby harming the obligee, and the
assignee was aware of the situation, the obligee may
also petition the People's Court for cancellation of
the obligor's act.
The scope of
cancellation right is limited to the extent of the
obligee's right to performance. The necessary
expenses for the obligee's exercise of its
cancellation right shall be borne by the obligor.
Article 75 Time
Limit for Exercising Obligee's Cancellation Right
The obligee's
cancellation right shall be exercised within one
year, commencing on the date when it became, or
should have become, aware of the cause for
cancellation. Such cancellation right is
extinguished if not exercised within five years,
commencing on the date of occurrence of the
obligor's act.
Article 76 A
Party's Internal Change Not Excuse for
Nonperformance
Once a contract
becomes effective, a party may not refuse to perform
its obligations thereunder on grounds of any change
in its name or change of its legal representative,
person in charge, or the person handling the
contract.
Chapter Five:
Amendment and Assignment of Contracts
Article 77
Amendment; Amendment Subject to Approval
A contract may be
amended if the parties have so agreed.
Where amendment to
the contract is subject to any procedure such as
approval or registration, etc. as required by a
relevant law or administrative regulation, such
provision applies.
Article 78
Ambiguous Amendment Not Effective
A contract term is
construed not to have been amended if the parties
failed to clearly prescribe the terms of the
amendment.
Article 79
Assignment of Rights; Exceptions
The obligee may
assign its rights under a contract in whole or in
part to a third person, except where such assignment
is prohibited:
(i) in light of
the nature of the contract;
(ii) by agreement
between the parties;
(iii) by law.
Article 80 Duty to
Notify When Assigning Rights; Revocation of
Assignment Subject to Assignee's Consent
Where the obligee
assigns its rights, it shall notify the obligor.
Such assignment is not binding upon the obligor if
notice was not given.
A notice of
assignment of rights given by the obligee may not be
revoked, except with the consent of the assignee.
Article 81
Assumption of Incidental Right in Case of Assignment
Where the obligee
assigns a right, the assignee shall assume any
incidental right associated with the obligee's
right, except where such incidental right is
exclusively personal to the obligee.
Article 82
Assigned Rights Subject to Accrued Defenses of
Obligor
Upon receipt of
the notice of assignment of the obligee's right, the
obligor may, in respect of the assignee, avail
itself of any defense it has against the assignor.
Article 83
Availability of Set-off to Obligor
Upon receipt of
the notice of assignment of the obligee's right, if
the obligor has any right to performance by the
assignor which is due before or at the same time as
the assigned obligee's right, the obligor may avail
itself of any set-off against the assignee.
Article 84
Delegation of Obligations Subject to Consent by
Obligee
Where the obligor
delegates its obligations under a contract in whole
or in part to a third person, such delegation is
subject to consent by the obligee.
Article 85
Availability of Defenses to New Obligor
Where the obligor
has delegated an obligation, the new obligor may
avail itself of any of the original obligor's
defenses against the obligee.
Article 86
Assumption of Incidental Obligation in Case of
Delegation
Where the obligor
delegates an obligation, the new obligor shall
assume any incidental obligation associated with the
main obligation, except where such incidental
obligation is exclusively personal to the original
obligor.
Article 87
Assignment Subject to Approval
Where the
obligee's assignment of a right or the obligor's
delegation of an obligation is subject to any
procedure such as approval or registration, etc. as
required by a relevant law or administrative
regulation, such provision applies.
Article 88
Concurrent Assignment and Delegation
Upon consent by
the other party, one party may concurrently assign
its rights and delegate its obligations under a
contract to a third person.
Article 89
Provisions Applicable to Concurrent Assignment
Where a party
concurrently assigns its rights and delegates its
obligations, the provisions in Article 79, Articles
81 to 83, and Articles 85 to 87 apply.
Article 90 Effect
of Combination or Division of Contract Party
Where a party has
effected combination after it entered into a
contract, the legal person or organization of any
other nature resulting from the combination assumes
the rights and obligations thereunder. Where a party
has effected division after it entered into a
contract, unless otherwise agreed by the obligee and
obligor thereunder, the legal persons or other
organizations resulting from the division jointly
and severally assume the rights and obligations
thereunder.
Chapter Six:
Discharge of Contractual Rights and Obligations
Article 91
Conditions for Discharge
The rights and
obligations under a contract are discharged in any
of the following circumstances:
(i) The
obligations were performed in accordance with the
contract;
(ii) The contract
was terminated;
(iii) The
obligations were set off against each other;
(iv) The obligor
placed the subject matter in escrow in accordance
with the law;
(v) The obligee
released the obligor from performance;
(vi) Both the
obligee's rights and obligor's obligations were
assumed by one party;
(vii) Any other
discharging circumstance provided by law or
prescribed by the parties occurred.
Article 92
Post-discharge Obligations
Upon discharge of
the rights and obligations under a contract, the
parties shall abide by the principle of good faith
and perform obligations such as notification,
assistance and confidentiality, etc. in accordance
with the relevant usage.
Article 93
Termination by Agreement; Termination Right
The parties may
terminate a contract if they have so agreed.
The parties may
prescribe a condition under which one party is
entitled to terminate the contract. Upon
satisfaction of the condition for termination of the
contract, the party with the termination right may
terminate the contract.
Article 94 Legally
Prescribed Conditions Giving Rise to Termination
Right
The parties may
terminate a contract if:
(i) force majeure
frustrated the purpose of the contract;
(ii) before the
time of performance, the other party expressly
stated or indicated by its conduct that it will not
perform its main obligations;
(iii) the other
party delayed performance of its main obligations,
and failed to perform within a reasonable time after
receiving demand for performance;
(iv) the other
party delayed performance or otherwise breached the
contract, thereby frustrating the purpose of the
contract;
(v) any other
circumstance provided by law occurred.
Article 95 Time
Limit for Termination; Extinguishment of Termination
Right
Where the law or
the parties prescribe a period for exercising
termination right, failure by a party to exercise it
at the end of the period shall extinguish such
right.
Where neither the
law nor the parties prescribe a period for
exercising termination right, failure by a party to
exercise it within a reasonable time after receiving
demand from the other party shall extinguish such
right.
Article 96
Termination by Notification; Termination Subject to
Approval
The party availing
itself of termination of a contract in accordance
with Paragraph 2 of Article 93 and Article 94 hereof
shall notify the other party. The contract is
terminated when the notice reaches the other party.
If the other party objects to the termination, the
terminating party may petition the People's Court or
an arbitration institution to affirm the validity of
the termination.
Where termination
of a contract is subject to any procedure such as
approval or registration, etc. as required by a
relevant law or administrative regulation, such
provision applies.
Article 97
Remedies in Case of Termination
Upon termination
of a contract, a performance which has not been
rendered is discharged; if a performance has been
rendered, a party may, in light of the degree of
performance and the nature of the contract, require
the other party to restore the subject matter to its
original condition or otherwise remedy the
situation, and is entitled to claim damages.
Article 98
Settlement and Winding-up Provisions Not Affected by
Discharge
Discharge of
contractual rights and obligations does not affect
the validity of contract provisions concerning
settlement of account and winding-up.
Article 99
Set-off; Set-off Not Subject to Condition
Where each party
owes performance to the other party that is due, and
the subject matters of the obligations are identical
in type and quality, either party may set off its
obligation against the obligation of the other
party, except where set-off is prohibited by law or
in light of the nature of the contract.
The party availing
itself of set-off shall notify the other party. The
notice becomes effective when it reaches the other
party. Set-off may not be subject to any condition
or time limit.
Article 100
Set-off Involving Non-identical Subject Matters
Where each party
owes performance to the other party that is due, and
the subject matters of the obligations are not
identical in type and quality, the parties may
effect set-off by mutual agreement.
Article 101
Conditions Giving Rise to Right to Place Subject
Matter in Escrow
Where any of the
following circumstances makes it difficult to render
performance, the obligor may place the subject
matter in escrow:
(i) The obligee
refuses to take delivery of the subject matter
without cause;
(ii) The obligee
cannot be located;
(iii) The obligee
is deceased or incapacitated, and his heir or
guardian is not determined;
(iv) Any other
circumstance provided by law occurs.
Where the subject
matter is not fit for escrow, or the escrow expenses
will be excessive, the obligor may auction or
liquidate the subject matter and place the proceeds
in escrow.
Article 102 Duty
to Notify in Case of Escrow
After placing the
subject matter in escrow, the obligor shall timely
notify the obligee or his heir or guardian, except
where the obligee cannot be located.
Article 103 Risk
of Loss; Fruits of Subject Matter Accrued during
Escrow
Once the subject
matter is in escrow, the risk of its damage or loss
is borne by the obligee. The fruits of the subject
matter accrued during escrow belong to the obligee.
Escrow expenses shall be borne by the obligee.
Article 104 Taking
Delivery of Subject Matter in Escrow Conditional
upon Performance; Time Limit
The obligee may
take delivery of the subject matter in escrow at any
time, provided that if the obligee owes performance
toward the obligor that is due, prior to the
obligee's performance or provision of assurance, the
escrow agent shall reject the obligee's attempt to
take delivery of the subject matter in escrow as
required by the obligor.
The right of the
obligee to take delivery of the subject matter in
escrow is extinguished if not exercised within five
years, commencing on the date when the subject
matter was placed in escrow. After deduction of
escrow expenses, the subject matter in escrow shall
be turned over to the state.
Article 105
Release
Where the obligee
released the obligor from performance in part or in
whole, the rights and obligations under the contract
are discharged in part or in whole.
Article 106 Merger
of Rights and Obligations
If the same party
assumed all the rights and obligations under a
contract, the rights and obligations thereunder are
discharged, except where the contract involves the
interests of a third person.
Chapter Seven:
Liabilities for Breach of Contracts
Article 107 Types
of Liabilities for Breach
If a party fails
to perform its obligations under a contract, or
rendered non-conforming performance, it shall bear
the liabilities for breach of contract by specific
performance, cure of non-conforming performance or
payment of damages, etc.
Article 108
Anticipatory Breach
Where one party
expressly states or indicates by its conduct that it
will not perform its obligations under a contract,
the other party may hold it liable for breach of
contract before the time of performance.
Article 109
Monetary Specific Performance
If a party fails
to pay the price or remuneration, the other party
may require payment thereof.
Article 110
Non-monetary Specific Performance; Exceptions
Where a party
fails to perform, or rendered non-conforming
performance of, a non-monetary obligation, the other
party may require performance, except where:
(i) performance is
impossible in law or in fact;
(ii) the subject
matter of the obligation does not lend itself to
enforcement by specific performance or the cost of
performance is excessive;
(iii) the obligee
does not require performance within a reasonable
time.
Article 111
Liabilities in Case of Quality Non-compliance
Where a
performance does not meet the prescribed quality
requirements, the breaching party shall be liable
for breach in accordance with the contract. Where
the liabilities for breach were not prescribed or
clearly prescribed, and cannot be determined in
accordance with Article 61 hereof, the aggrieved
party may, by reasonable election in light of the
nature of the subject matter and the degree of loss,
require the other party to assume liabilities for
breach by way of repair, replacement, remaking,
acceptance of returned goods, or reduction in price
or remuneration, etc.
Article 112
Liability for Damages Notwithstanding Subsequent
Performance or Cure of Non-conforming Performance
Where a party
failed to perform or rendered non-conforming
performance, if notwithstanding its subsequent
performance or cure of non-conforming performance,
the other party has sustained other loss, the
breaching party shall pay damages.
Article 113
Calculation of Damages; Damages to Consumer
Where a party
failed to perform or rendered non-conforming
performance, thereby causing loss to the other
party, the amount of damages payable shall be
equivalent to the other party's loss resulting from
the breach, including any benefit that may be
accrued from performance of the contract, provided
that the amount shall not exceed the likely loss
resulting from the breach which was foreseen or
should have been foreseen by the breaching party at
the time of conclusion of the contract.
Where a merchant
engages in any fraudulent activity while supplying
goods or services to a consumer, it is liable for
damages in accordance with the Law of the People's
Republic of China on Protection of Consumer Rights.
Article 114
Liquidated Damages; Adjustment; Continuing
Performance Notwithstanding Payment of Liquidated
Damages
The parties may
prescribe that if one party breaches the contract,
it will pay a certain sum of liquidated damages to
the other party in light of the degree of breach, or
prescribe a method for calculation of damages for
the loss resulting from a party's breach.
Where the amount
of liquidated damages prescribed is below the loss
resulting from the breach, a party may petition the
People's Court or an arbitration institution to
increase the amount; where the amount of liquidated
damages prescribed exceeds the loss resulting from
the breach, a party may petition the People's Court
or an arbitration institution to decrease the amount
as appropriate.
Where the parties
prescribed liquidated damages for delayed
performance, the breaching party shall, in addition
to payment of the liquidated damages, render
performance.
Article 115
Deposit
The parties may
prescribe that a party will give a deposit to the
other party as assurance for the obligee's right to
performance in accordance with the Security Law of
the People's Republic of China. Upon performance by
the obligor, the deposit shall be set off against
the price or refunded to the obligor. If the party
giving the deposit failed to perform its obligations
under the contract, it is not entitled to claim
refund of the deposit; where the party receiving the
deposit failed to perform its obligations under the
contract, it shall return to the other party twice
the amount of the deposit.
Article 116
Election Between Deposit or Liquidated Damages
Clauses
If the parties
prescribed payment of both liquidated damages and a
deposit, in case of breach by a party, the other
party may elect in alternative to apply the
liquidated damages clause or the deposit clause.
Article 117 Force
Majeure
A party who was
unable to perform a contract due to force majeure is
exempted from liability in part or in whole in light
of the impact of the event of force majeure, except
otherwise provided by law. Where an event of force
majeure occurred after the party's delay in
performance, it is not exempted from liability.
For purposes of
this Law, force majeure means any objective
circumstance which is unforeseeable, unavoidable and
insurmountable.
Article 118 Duty
to Notify in Case of Force Majeure
If a party is
unable to perform a contract due to force majeure,
it shall timely notify the other party so as to
mitigate the loss that may be caused to the other
party, and shall provide proof of force majeure
within a reasonable time.
Article 119
Non-Breaching Party's Duty to Mitigate Loss in Case
of Breach
Where a party
breached the contract, the other party shall take
the appropriate measures to prevent further loss;
where the other party sustained further loss due to
its failure to take the appropriate measures, it may
not claim damages for such further loss.
Any reasonable
expense incurred by the other party in preventing
further loss shall be borne by the breaching party.
Article 120
Bilateral Breach
In case of
bilateral breach, the parties shall assume their
respective liabilities accordingly.
Article 121 Breach
Due to Act of Third Person
Where a party's
breach was attributable to a third person, it shall
nevertheless be liable to the other party for
breach. Any dispute between the party and such third
person shall be resolved in accordance with the law
or the agreement between the parties.
Article 122
Election of Remedy in Tort or in Contract
Where a party's
breach harmed the personal or property interests of
the other party, the aggrieved party is entitled to
elect to hold the party liable for breach of
contract in accordance herewith, or hold the party
liable for tort in accordance with any other
relevant law.
Chapter Eight:
Other Provisions
Article 123
Applicability of Other Laws
Where another law
provides otherwise in respect of a certain contract,
such provisions prevail.
Article 124
Applicability to Non-categorized Contracts
Where there is no
express provision in the Specific Provisions hereof
or any other law concerning a certain contract, the
provisions in the General Principles hereof apply,
and reference may be made to the provisions in the
Specific Provisions hereof or any other law
applicable to a contract which is most similar to
such contract.
Article 125
Contract Interpretation; Language Versions
In case of any
dispute between the parties concerning the
construction of a contract term, the true meaning
thereof shall be determined according to the words
and sentences used in the contract, the relevant
provisions and the purpose of the contract, and in
accordance with the relevant usage and the principle
of good faith.
Where a contract
was executed in two or more languages and it
provides that all versions are equally authentic,
the words and sentences in each version are
construed to have the same meaning. In case of any
discrepancy in the words or sentences used in the
different language versions, they shall be
interpreted in light of the purpose of the contract.
Article 126 Choice
of Law in Foreign-related Contracts; Contracts
Subject to Mandatory Application of Chinese Law
Parties to a
foreign related contract may select the applicable
law for resolution of a contractual dispute, except
otherwise provided by law. Where parties to the
foreign related contract failed to select the
applicable law, the contract shall be governed by
the law of the country with the closest connection
thereto.
For a Sino-foreign
Equity Joint Venture Enterprise Contract,
Sino-foreign Cooperative Joint Venture Contract, or
a Contract for Sino-foreign Joint Exploration and
Development of Natural Resources which is performed
within the territory of the People's Republic of
China, the law of the People's Republic of China
applies.
Article 127 Role
of Regulatory Authorities
Within the scope
of their respective duties, the authority for the
administration of industry and commerce and other
relevant authorities shall, in accordance with the
relevant laws and administrative regulations, be
responsible for monitoring and dealing with any
illegal act which, through the conclusion of a
contract, harms the state interests or the public
interests; where such act constitutes a crime,
criminal liability shall be imposed in accordance
with the law.
Article 128
Dispute Resolution
The parties may
resolve a contractual dispute through settlement or
mediation.
Where the parties
do not wish to, or are unable to, resolve such
dispute through settlement or mediation, the dispute
may be submitted to the relevant arbitration
institution for arbitration in accordance with the
arbitration agreement between the parties. Parties
to a foreign related contract may apply to a Chinese
arbitration institution or another arbitration
institution for arbitration. Where the parties did
not conclude an arbitration agreement, or the
arbitration agreement is invalid, either party may
bring a suit to the People's Court. The parties
shall perform any judgment, arbitral award or
mediation agreement which has taken legal effect; if
a party refuses to perform, the other party may
apply to the People's Court for enforcement.
Article 129 Time
Limit for Action
For a dispute
arising from a contract for the international sale
of goods or a technology import or export contract,
the time limit for bringing a suit or applying for
arbitration is four years, commencing on the date
when the party knew or should have known that its
rights were harmed. For a dispute arising from any
other type of contract, the time limit for bringing
a suit or applying for arbitration shall be governed
by the relevant law.
SPECIFIC
PROVISIONS
Chapter Nine:
Sales Contracts
Article 130
Definition of Sales Contract
A sales contract
is a contract whereby the seller transfers title to
the subject matter to the buyer, who pays the price.
Article 131
Additional Terms
In addition to the
terms set forth in Article 12 hereof, a sales
contract may include terms such as packing method,
inspection standard and inspection method, method of
settlement of account, and the language versions of
the contract and the authenticity thereof, etc.
Article 132 Title
or Disposal Power; Prohibition of or Restriction on
Transfer
The seller shall
have title to, or the power to dispose of, the
subject matter for sale.
Where a law or
administrative regulation prohibits or restricts the
transfer of the subject matter, such provision
applies.
Article 133
Passing of Title
Title to the
subject matter passes at the time of its delivery,
except otherwise provided by law or agreed by the
parties.
Article 134
Conditional Sale
The parties may
prescribe in the sales contract that title to the
subject matter remain in the seller until the buyer
has paid the price or has performed other
obligations.
Article 135
Seller's Obligations with Respect to Title Transfer
The seller shall
perform the obligations of delivering to the buyer
the subject matter or the document for taking
delivery thereof, as well as transferring title to
the subject matter.
Article 136
Delivery of Related Materials by Seller
In addition to the
document for taking delivery, the seller shall
deliver to the buyer documents and materials related
to the subject matter in accordance with the
contract or in accordance with the relevant usage.
Article 137 Sales
Involving Intellectual Property
In a sale of any
subject matter which contains intellectual property
such as computer software, etc., the intellectual
property in the subject matter does not vest in the
buyer, except otherwise provided by law or agreed by
the parties.
Article 138 Time
of Delivery
The seller shall
deliver the subject matter at the prescribed time.
Where the contract prescribes a period during which
delivery is to take place, the seller may deliver at
any time during the delivery period.
Article 139
Absence of Provision for Time of Delivery
Where the time for
delivery of the subject matter was not prescribed or
clearly prescribed, Article 61 and Item 4 of Article
62 apply.
Article 140 Time
of Delivery of Subject Matter Already in Buyer's
Possession
Where the subject
matter was in buyer's possession prior to conclusion
of the contract, the time when the contract becomes
effective is the time of delivery.
Article 141
Absence of Provision for Place of Delivery
The seller shall
deliver the subject matter at the prescribed place.
Where the place of
delivery was not prescribed or clearly prescribed,
and cannot be determined in accordance with Article
61 hereof, the following provisions apply:
(i) If the subject
matter needs carriage, the seller shall deliver the
subject matter to the first carrier for transmission
to the buyer;
(ii) Where the
subject matter does not need carriage, if at the
time of conclusion of the contract, the buyer and
the seller knew the subject matter was at a
particular place, the seller shall deliver the
subject matter at such place; and if they did not
know the location of the subject matter, delivery
shall take place at the seller's place of business
at the time of conclusion of the contract.
Article 142
Passing of Risk
The risk of damage
to or loss of the subject matter is borne by the
seller prior to delivery, and by the buyer after
delivery, except otherwise provided by law or agreed
by the parties.
Article 143 Risk
Allocation in Case of Delayed Delivery
Where the subject
matter was not delivered at the prescribed time due
to any reason attributable to the buyer, the buyer
shall bear the risk of damage to or loss of the
subject matter as from the date of breach.
Article 144 Risk
Allocation for Subject Matter in Transit
Where the seller
sells the subject matter which has been delivered to
a carrier for transportation and is in transit,
unless otherwise agreed by the parties, the risk of
damage or loss is borne by the buyer as from the
time of formation of the contract.
Article 145
Passing of Risk in Case of Seller Arranged Carriage
Where the place of
delivery was not prescribed or clearly prescribed,
if the subject matter needs carriage as provided in
Item (i) of Paragraph 2 of Article 141, the risk of
damage to or loss of the subject matter is borne by
the buyer as from the time the seller delivers the
subject matter to the first carrier.
Article 146 Risk
Allocation in Case of Delay in Taking Delivery
Where the seller
placed the subject matter at the place of delivery
in accordance with the contract or in accordance
with Item (ii) of Paragraph 2 of Article 141 hereof
and the buyer fails to take delivery in breach of
the contract, the risk of damage to or loss of the
subject matter is borne by the buyer as from the
date of breach.
Article 147
Passing of Risk Notwithstanding Failure to Deliver
Documents
Failure by the
seller to deliver the documents and materials
relating to the subject matter in accordance with
the contract does not affect passing of the risk of
damage to or loss of the subject matter.
Article 148
Rejection on Grounds of Quality Non-compliance; Risk
Allocation in Case of Rejection
Where the purpose
of the contract is frustrated due to failure of the
subject matter to meet the quality requirements, the
buyer may reject the subject matter or terminate the
contract. If the buyer rejects the subject matter or
terminates the contract, the risk of damage to or
loss of the subject matter is borne by the seller.
Article 149 Right
to Remedy Notwithstanding Assumption of Risk
Buyer's assumption
of the risk of damage to or loss of the subject
matter does not prejudice its right to hold the
seller liable for breach of contract if the seller
rendered non-conforming performance.
Article 150 Third
Party Claim Warranty
The seller is
obligated to warrant that the buyer will be free
from any third party claim against it in respect of
the subject matter delivered, except otherwise
provided by law.
Article 151
Buyer's Knowledge Releasing Third Party Claim
Warranty
Where the buyer
knew or should have known that the subject matter
was subject to a third party claim at the time of
conclusion of the contract, the seller does not
assume the obligation prescribed in Article 150
hereof.
Article 152 Right
to Withhold Payment in Case of Third Party Claim
Where the buyer
has conclusive evidence establishing that a third
person may make a claim on the subject matter, it
may withhold payment of the corresponding price,
except where the seller has provided appropriate
assurance.
Article 153
Quality Specifications
The seller shall
deliver the subject matter in compliance with the
prescribed quality requirements. Where the seller
gave quality specifications for the subject matter,
the subject matter delivered shall comply with the
quality requirements set forth therein.
Article 154
Absence of Prescribed Quality Requirements
Where the quality
requirements for the subject matter were not
prescribed or clearly prescribed, and cannot be
determined in accordance with Article 61 hereof,
Item (i) of Article 62 hereof applies.
Article 155
Quality Non-compliance Giving Rise to Claims
If the subject
matter delivered by the seller fails to comply with
the quality requirements, the buyer may hold the
seller liable for breach of contract in accordance
with Article 111 hereof.
Article 156
Packing Method
The seller shall
deliver the subject matter packed in the prescribed
manner. Where a packing method was not prescribed or
clearly prescribed, and cannot be determined in
accordance with Article 61 hereof, the subject
matter shall be packed in a customary manner, or, if
there is no customary manner, in a manner adequate
to protect the subject matter.
Article 157
Inspection upon Receipt of Subject Matter
Upon receipt of
the subject matter, the buyer shall inspect it
within the prescribed inspection period. Where no
inspection period was prescribed, the buyer shall
timely inspect the subject matter.
Article 158
Consequence of Failure to Inspect; Exceptions
Where an
inspection period was prescribed, the buyer shall
notify the seller of any non-compliance in quantity
or quality of the subject matter within such
inspection period. Where the buyer delayed in
notifying the seller, the quantity or quality of the
subject matter is deemed to comply with the
contract.
Where no
inspection period was prescribed, the buyer shall
notify the seller within a reasonable period,
commencing on the date when the buyer discovered or
should have discovered the quantity or quality
non-compliance. If the buyer fails to notify within
a reasonable period or fails to notify within 2
years, commencing on the date when it received the
subject matter, the quantity or quality of the
subject matter is deemed to comply with the
contract, except that if there is a warranty period
in respect of the subject matter, the warranty
period applies and supersedes such two year period.
Where the seller
knew or should have known the non-compliance of the
subject matter, the buyer is not subject to the time
limits for notification prescribed in the previous
two paragraphs.
Article 159
Absence of Price Provision
The buyer shall
pay the price in the prescribed amount. Where the
price was not prescribed or clearly prescribed, the
provisions of Article 61 and Item (ii) of Article 62
apply.
Article 160 Place
of Payment
The buyer shall
pay the price at the prescribed place. Where the
place of payment was not prescribed or clearly
prescribed, and cannot be determined in accordance
with Article 61 hereof, the buyer shall make payment
at the seller's place of business, provided that if
the parties agreed that payment shall be conditional
upon delivery of the subject matter or the document
for taking delivery thereof, payment shall be made
at the place where the subject matter, or the
document for taking delivery thereof, is delivered.
Article 161 Time
of Payment
The buyer shall
pay the price at the prescribed time. Where the time
for payment was not prescribed or clearly
prescribed, and cannot be determined in accordance
with Article 61 hereof, the buyer shall make payment
at the same time it receives the subject matter or
the document for taking delivery thereof.
Article 162
Buyer's Option in Case Delivered Quantity Exceeds
Prescribed Amount
Where the seller
delivered the subject matter in a quantity greater
than that prescribed in the contract, the buyer may
accept or reject the excess quantity. Where the
buyer accepts the excess quantity, it shall pay the
price based on the contract rate; where the buyer
rejects the excess quantity, it shall timely notify
the seller.
Article 163 Title
to Fruits Before and After Delivery
The fruits of the
subject matter belong to the seller if accrued
before delivery, and to the buyer if accrued after
delivery.
Article 164 Effect
of Termination on Grounds of Non-compliance of Main
or Ancillary Components
Where a contract
is terminated due to non-compliance of any main
component of the subject matter, the effect of
termination extends to the ancillary components.
Where the contract is terminated due to
non-compliance of any ancillary component of the
subject matter, the effect of termination does not
extend to the main components.
Article 165
Termination in Part or in Whole
Where the subject
matter comprises of a number of components, one of
which does not comply with the contract, the buyer
may terminate the portion of the contract in respect
of such component, provided that if severance of
such component with the other components will
significantly diminish the value of the subject
matter, the party may terminate the contract in
respect of such number of components.
Article 166 Effect
of Termination in Case of Delivery in Installments
Where the seller
is to deliver the subject matter in installments, if
the seller's failure to deliver or non-conforming
delivery of one installment frustrates the purpose
of the contract in respect of such installment, the
buyer may terminate the portion of the contract in
respect thereof.
If the seller's
failure to deliver or non-conforming delivery of one
installment frustrates the purpose of the contract
in respect of all subsequent installments
notwithstanding their delivery, the buyer may
terminate the portion of the contract in respect of
such installment as well as any subsequent
installment.
If the buyer is to
terminate the portion of the contract in respect of
a particular installment which is interdependent
with all other installments, it may terminate the
contract in respect of all delivered and undelivered
installments.
Article 167
Termination in Case of Sale by Installment Payment
In a sale by
installment payment, where the buyer failed to make
payments as they became due, if the delinquent
amount has reached one fifth of the total price, the
seller may require payment of the full price from
the buyer or terminate the contract. If the seller
terminates the contract, it may require the buyer to
pay a fee for its use of the subject matter.
Article 168
Quality Provisions in Case of Sale by Sample
In a sale by
sample, the parties shall place the sample under
seal, and may specify the quality of the sample. The
subject matter delivered by the seller shall comply
with the sample as well as the quality
specifications.
Article 169 Latent
Defect in Sample
In a sale by
sample, if the buyer was not aware of a latent
defect in the sample, the subject matter delivered
by the seller shall nevertheless comply with the
normal quality standard for a like item, even though
the subject matter delivered complies with the
sample.
Article 170 Sale
by Trial
In a sale by
trial, the parties may prescribe the trial period.
Where a trial period was not prescribed or clearly
prescribed, and cannot be determined in accordance
with Article 61 hereof, it shall be determined by
the seller.
Article 171
Purchase or Rejection During Trial Period
In a sale by
trial, the buyer may either purchase or reject the
subject matter during the trial period. At the end
of the trial period, the buyer is deemed to have
made the purchase if it fails to manifest its
intention to purchase or reject the subject matter.
Article 172 Sale
by Tender Governed by Relevant Laws
In a sale by
tender, matters such as the rights and obligations
of the parties and the tendering procedure, etc. are
governed by the relevant laws and administrative
regulations.
Article 173 Sale
by Auction Governed by Relevant Laws
In a sale by
auction, matters such as the rights and obligations
of the parties and the auctioning procedure, etc.
are governed by the relevant laws and administrative
regulations.
Article 174
General Applicability to Contracts for Value
For any other
contract for value, if the law provides for such
contract, such provisions apply; absent any such
provision, reference shall be made to the relevant
provisions governing sales contracts.
Article 175
Applicability to Barter Transaction
Where the parties
agree on a barter transaction involving transfer of
title to the subject matters, such transaction shall
be governed by reference to the relevant provisions
governing sales contracts.
Chapter Ten:
Contracts for Supply of Power, Water, Gas , Or Heat
Article 176
Definition of Power Supply Contract
A power supply
contract is a contract whereby the power supplier
supplies power to the power customer, who pays the
electricity charge.
Article 177 Terms
of Power Supply Contract
A power supply
contract includes terms such as the method, quality,
and time of power supply, and the capacity, location
and nature of power use, and the metering method,
electricity rate, the method of settlement of
electricity charge, and the responsibility for
maintenance of the power supply and power use
facilities, etc.
Article 178 Place
of Performance of Power Supply Contract
The place of
performance of a power supply contract shall be the
place prescribed by the parties, and if not
prescribed or clearly prescribed, the place of
performance shall be the boundary where ownership of
the power supply facilities is divided.
Article 179
Obligations of Power Supplier
The power supplier
shall supply power in a safe manner in accordance
with the power supply quality standard mandated by
the state and in accordance with the contract. Where
the power supplier failed to supply power in a safe
manner in accordance with the power supply quality
standard mandated by the state and in accordance
with the contract, thereby causing loss to the power
customer, it shall be liable for damages.
Article 180
Obligation to Notify in Case of Scheduled Suspension
Where the power
supplier needs to suspend power supply due to
reasons such as periodical maintenance or
provisional maintenance of the power supply
facilities, legally required power rationing, or
illegal use of power by the power customer, etc., it
shall notify the power customer in advance in
accordance with the relevant stipulations of the
state. Where the power supplier suspended power
supply without notifying the power customer in
advance, thereby causing loss to the power customer,
it shall be liable for damages.
Article 181
Obligation to Make Emergency Repair in Case of Power
Outage
Where a power
outage is caused by reasons such as natural
disasters, etc., the power supplier shall timely
make emergency repair in accordance with the
relevant stipulations of the state. Where the power
supplier failed to timely make emergency repair,
thereby causing loss to the power customer, it shall
be liable for damages.
Article 182
Payment of Electricity Charge
The power customer
shall timely pay the electricity charge in
accordance with the relevant stipulations of the
state and in accordance with the contract. Where the
power customer delayed in paying the electricity
charge, it shall pay liquidated damages in
accordance with the contract. Where the power
customer failed to pay the electricity charge and
liquidated damages within a reasonable time after
receiving demand for payment, the power supplier may
shut off the power supply in accordance with the
procedure prescribed by the state.
Article 183 Power
Customer's Obligation of Proper Use
The power customer
shall use power in a safe manner in accordance with
the relevant stipulations of the state and in
accordance with the contract. Where the power
customer failed to use power in a safe manner in
accordance with the relevant stipulations of the
state and in accordance with the contract, thereby
causing loss to the power supplier, it shall be
liable for damages.
Article 184
Applicability to Contract for Supply of Water, Gas
or Heat
A contract for the
supply of water, gas or heat shall be governed by
reference to the relevant provisions governing power
supply contracts.
Chapter Eleven:
Gift Contracts
Article 185
Definition of Gift Contract
A gift contract is
a contract whereby the donor conveys his property to
the donee without reward and the donee manifests his
acceptance of the gift.
Article 186
Revocation Prior to Transfer of Rights; Exception
Prior to the
transfer of rights to the gift property, the donor
may revoke the gift.
The previous
paragraph does not apply to any gift contract the
nature of which serves public interests or fulfills
a moral obligation, such as disaster relief, poverty
relief, etc., or any gift contract which has been
notarized.
Article 187
Observance of Conveyance Procedure
Where conveyance
of the gift property is subject to any procedure
such as registration, etc. under the law, the
relevant procedure shall be carried out.
Article 188
Donee's Right to Require Delivery in Certain Cases
In the case of a
gift contract the nature of which serves public
interests or fulfills a moral obligation, such as
disaster relief, poverty relief, etc., or a gift
contract which has been notarized, if the donor
fails to deliver the gift property, the donee may
require delivery.
Article 189
Liability of Donor for Misconduct or Gross
Negligence
Where the gift
property is damaged or lost due to any intentional
misconduct or gross negligence of the donor, he
shall be liable for damages.
Article 190 Gift
May Be Subject to Obligations
A gift may be
subject to obligations.
Where the gift is
subject to obligations, the donee shall perform his
obligations in accordance with the contract.
Article 191 Donor
Not Liable for Defect; Exceptions
The donor is not
liable for any defect in the gift property. Where
the gift is subject to obligations, and the gift
property is defective, the donor has the same
warranty obligations as a seller to the extent of
the prescribed obligations.
Where the donor
intentionally omitted to inform the donee of the
defect or warranted the absence of any defect,
thereby causing loss to the donee, he shall be
liable for damages.
Article 192
Circumstances Giving Rise to Revocation Right
Where the donee is
in any of the following circumstances, the donor may
revoke the gift:
(i) seriously
harming the donor or any immediate family member
thereof;
(ii) failing to
perform support obligations owed to the donor;
(iii) failing to
perform the obligations under the gift contract.
The donor shall
exercise his revocation right within one year after
he became, or should have become, aware of the cause
for revocation.
Article 193
Exercise of Revocation Right by Heir
Where the donor is
deceased or incapacitated due to the donee's illegal
act, his heir or legal agent may revoke the gift.
The heir or legal
agent of the donor shall exercise the right of
revocation within six months after he became, or
should have become, aware of the cause for
revocation.
Article 194
Remedies in Case of Revocation
Upon revocation of
the gift, the person with the revocation right may
claim restitution of the gift property from the
donee.
Article 195
Economic Hardship Releases Gift Obligation
If the donor's
economic situation has deteriorated significantly,
thereby seriously impacting on his business
operation or family life, he may be released from
the gift obligations.
Chapter Twelve:
Contracts for Loan of Money
Article 196
Definition of Contract for Loan of Money
A contract for
loan of money is a contract whereby the borrower
borrows a sum of money from the lender, and returns
the sum borrowed and pays interest thereon at the
prescribed time.
Article 197
Writing Requirement; Terms
A contract for
loan of money shall be in writing, except where the
loan is between natural persons who have agreed
otherwise.
A contract for
loan of money includes terms such as the loan's
type, currency, purpose, amount, interest rate, term
and method of repayment, etc.
Article 198
Assurance by Borrower
In entering into a
contract for loan of money, the lender may require
the borrower to provide assurance. Such assurance
shall be arranged in accordance with the Security
Law of the People's Republic of China.
Article 199
Borrower's Disclosure Obligation
In entering into a
contract for loan of money, the borrower shall
provide true information concerning its business
operation and financial condition in connection with
the loan as required by the lender.
Article 200
Deduction of Interest in Advance Prohibited
No interest shall
be deducted from the principal in advance. Where any
interest amount is deducted from the principal in
advance, the repayment of principal and calculation
of interest shall be based on the actual amount
borrowed.
Article 201
Remedies in Case of Failure to Make Loan Amount
Available Or Failure to Draw Down
Where the lender
failed to make the loan amount available on the
prescribed date and in the prescribed amount,
thereby causing loss to the borrower, it shall pay
damages.
Where the borrower
failed to draw down on the prescribed date and in
the prescribed amount, it shall nevertheless pay the
interest on the prescribed date and in the
prescribed amount.
Article 202 Lender
Entitled to Monitor Use of Proceeds
The lender may
examine and monitor the application of the proceeds
in accordance with the contract. The borrower shall
periodically provide the lender with materials such
as related financial and accounting reports, etc. in
accordance with the contract.
Article 203
Lender's Remedies in Case of Borrower's Misuse of
Proceeds
Where the borrower
fails to use the proceeds for the prescribed
purpose, the lender may withhold funding, call the
loan, or terminate the contract.
Article 204
Minimum and Maximum Interest Rates
The interest rate
on the loan provided by a financial institution
engaged in lending operation shall be prescribed
between the minimum and maximum rates mandated by
the People's Bank of China.
Article 205 Time
of Interest Payment
The borrower shall
pay the interest at the prescribed time. Where the
time of interest payment was not prescribed or
clearly prescribed, and cannot be determined in
accordance with Article 61 hereof, if the loan term
is less than one year, the interest shall be paid
together with the principal at the time of
repayment; if the loan term is one year or longer,
the interest shall be paid at the end of each annual
period, and where the remaining period is less than
one year, the interest shall be paid together with
the principal at the time of repayment.
Article 206 Time
of Principal Repayment
The borrower shall
repay the principal at the prescribed time. Where
the time of repayment was not prescribed or clearly
prescribed, and cannot be determined in accordance
with Article 61 hereof, the borrower may repay at
any time; and the lender may demand repayment from
the borrower within a reasonable time.
Article 207
Delayed Repayment Interest
Where the borrower
failed to repay the loan at the prescribed time, it
shall pay delayed repayment interest in accordance
with the contract or the relevant stipulations of
the state.
Article 208
Calculation of Interest in Case of Prepayment
Where the borrower
prepays the loan, unless otherwise agreed by the
parties, the interest shall be calculated based on
the actual period of loan.
Article 209
Extension of Loan Term
The borrower may
apply to the lender for extension of the loan term
before its maturity. Upon consent by the lender, the
loan term may be extended.
Article 210 Time
of Effectiveness of Loan Contract between Natural
Persons
A contract for
loan of money between natural persons becomes
effective at the time the lender makes the loan
amount available.
Article 211
Interest under Loan Contract between Natural Persons
Under a contract
for loan of money between natural persons, if
payment of interest was not prescribed or clearly
prescribed, the loan is deemed interest free.
Under a contract
for loan of money between natural persons, the
interest rate on the loan may not contravene the
relevant stipulations of the state regarding limit
on loan interest rate.
Chapter Thirteen:
Leasing Contracts
Article 212
Definition of Leasing Contract
A leasing contract
is a contract whereby the lessor delivers to the
lessee the lease item for it to use or accrue
benefit from, and the lessee pays the rent.
Article 213 Terms
of Leasing Contract
A leasing contract
includes terms such as the name, quantity and
purpose of the lease item, lease term, amount of
rent, time and method of rent payment, as well as
maintenance and repair of the lease item, etc.
Article 214 Limit
on Lease Term; Renewal
The lease term may
not exceed twenty years. If the lease term exceeds
twenty years, the portion of the lease term beyond
the initial twenty year period is invalid.
At the end of the
lease term, the parties may renew the lease,
provided that the renewed term may not exceed twenty
years commencing on the date of renewal.
Article 215
Writing Requirement in Case Lease Term Is Six Months
or Longer
Where the lease
term is six months or longer, the lease shall be in
writing. If the parties fail to adopt a writing, the
lease is deemed a non-term lease.
Article 216
Lessor's Obligation to Deliver Lease Item
The lessor shall
deliver the lease item to the lessee in accordance
with the contract and shall, during the lease term,
keep the lease item fit for the prescribed purpose.
Article 217 Manner
of Using Lease Item
The lessee shall
use the lease item in the prescribed manner. Where
the manner of use of the lease item was not
prescribed or clearly prescribed, and cannot be
determined in accordance with Article 61 hereof, the
lease item shall be used in a manner consistent with
its nature.
Article 218 Lessee
Not Liable for Wear and Tear
Where the lessee
used the lease item in the prescribed manner or in a
manner consistent with its nature, thereby causing
wear and tear to the lease item, it is not liable
for damages.
Article 219 Lessor
Entitled to Terminate in Case of Unauthorized Use
Where the lessee
failed to use the lease item in the prescribed
manner or in a manner consistent with its nature,
thereby causing damage to it, the lessor may
terminate the contract and claim damages.
Article 220
Lessor's Maintenance Obligations
The lessor shall
perform the obligations of maintenance and repair of
the lease item, except otherwise agreed by the
parties.
Article 221
Lessee's Remedies in Case of Lessor's Failure to
Maintain Lease Item
Where the lease
item needs maintenance or repair, the lessee may
require the lessor to perform maintenance or repair
within a reasonable time.
If the lessor
fails to fulfill its obligations of maintenance or
repair, the lessee may maintain or repair the lease
item on its own at the lessor's expense. Where the
lessee's use of the lease item is impaired due to
maintenance or repair thereof, the rent shall be
reduced or the lease term shall be extended
accordingly.
Article 222
Lessee's Obligation of Due Care
The lessee shall
keep the lease item with due care and shall be
liable for damages if the lease item was damaged or
lost due to improper care.
Article 223
Improvement or Addition
Subject to consent
by the lessor, the lessee may make improvement on or
addition to the lease item.
If the lessee made
improvement on or addition to the lease item without
consent by the lessor, the lessor may require the
lessee to restore the lease item to its original
condition or claim damages.
Article 224
Sublease
Subject to consent
by the lessor, the lessee may sublease the lease
item to a third person. Where the lessee subleases
the lease item, the leasing contract between the
lessee and the lessor remains valid, and if the
third person causes damage to the lease item, the
lessee shall pay damages.
Where the lessee
subleases the lease item without the consent of the
lessor, the lessor may terminate the contract.
Article 225
Benefit Accrued from Lease Item During Lease Term
During the lease
term, any benefit accrued from the possession or use
of the lease item belongs to the lessee, except
otherwise agreed by the parties.
Article 226 Time
for Rent Payment
The lessee shall
pay the rent at the prescribed time. Where the time
of payment was not prescribed or clearly prescribed,
and cannot be determined in accordance with Article
61 hereof, the rent shall be paid at the end of the
lease term if it is less than one year; if the lease
term is one year or longer, the rent shall be paid
at the end of each annual period, and where the
remaining period is less than one year, the rent
shall be paid at the end of the lease term.
Article 227
Lessor's Remedies in Case of Non-Payment of Rent
Where the lessee
failed to pay or delayed in paying the rent without
cause, the lessor may require the lessee to pay the
rent within a reasonable period. If the lessee fails
to pay the rent at the end of such period, the
lessor may terminate the contract.
Article 228
Lessee's Remedies in Case of Third Party Claim; Duty
to Notify
If due to any
claim by a third person, the lessee is unable to use
or accrue benefit from the lease item, the lessee
may require reduction in rent or refuse to pay rent.
In case of any
claim by a third person, the lessee shall timely
notify the lessor.
Article 229
Leasing Contract Not Affected by Change of Ownership
Any change of
ownership to the lease item does not affect the
validity of the leasing contract.
Article 230 Sale
of Dwelling Unit under Lease
Where the lessor
is to sell a dwelling unit under a lease, it shall
give the lessee a reasonable advance notice before
the sale, and the lessee has the right of first
refusal under the same conditions.
Article 231
Lessee's Remedies in Case of Damage Not Attributable
to Itself
Where the lease
item was damaged or lost in part or in whole due to
any reason not attributable to the lessee, the
lessee may require reduction in rent or refuse to
pay rent; where the purpose of the contract is
frustrated due to damage to or loss of the lease
item in part or in whole, the lessee may terminate
the contract.
Article 232
Non-Term Lease
Where the term of
a lease was not prescribed or clearly prescribed,
and cannot be determined in accordance with Article
61 hereof, such lease is deemed a non-term lease.
Either party may terminate the contract at any time,
provided that the lessor shall give the lessee a
reasonable advance notice before it terminates the
contract.
Article 233 Lessee
Entitled to Terminate in Case of Danger to Safety or
Health
Where the lease
item poses a danger to the safety or health of the
lessee, the lessee may terminate the contract at any
time even if the lessee was aware of the quality
non-compliance of the lease item at the time of
conclusion of the contract.
Article 234 Lease
of Dwelling Unit Assumable
Where the lessee
is deceased during the term of a dwelling unit
lease, the person jointly living in the unit with
the lessee while the lessee was alive may continue
leasing it on the terms of the original leasing
contract.
Article 235
Condition of Lease Item at End of Lease Term
The lessee shall
return the lease item at the end of the lease term.
The returned lease item shall be in a condition
resulting from its use in the prescribed manner or
in a manner consistent with its nature.
Article 236 Effect
of Continued Use Beyond Lease Term
Upon expiration of
the lease term, if the lessee continues to use the
lease item without objection by the lessor, the
original leasing contract remains effective,
provided that it becomes a non-term lease.
Chapter Fourteen:
Financial Leasing Contracts
Article 237
Definition of Financial Leasing Contract
A financial
leasing contract is a contract whereby the lessor,
upon purchase of the lessee-selected lease item from
a lessee-selected seller, provides the lease item to
the lessee for its use, and the lessee pays the
rent.
Article 238 Terms
of Financial Leasing Contract; Writing Requirement
A financial
leasing contract includes terms such as the name,
quantity, specifications, technical performance, and
method of inspection of the lease item, the lease
term, the rental components and the time, method and
currency of payment, as well as the ownership of the
lease item at the end of the lease term, etc.
A financial
leasing contract shall be in writing.
Article 239
Lessee's Assumption of Buyer's Rights
Under the sales
contract concluded by the lessor according to the
lessee's selection of the seller and the lease item,
the seller shall deliver the subject matter to the
lessee in accordance with the contract, and the
lessee enjoys the rights of the buyer in respect of
taking delivery of the subject matter.
Article 240
Lessee's Assumption of Buyer's Remedies in Case of
Seller's Non-performance
The lessor, the
seller and the lessee may agree that any claim
arising from the seller's non-performance of its
obligations under the sales contract will be made by
the lessee. Where the lessee makes such a claim, the
lessor shall provide assistance.
Article 241
Certain Amendment of Sales Contract Subject to
Consent by Lessee
Absent consent by
the lessee, the lessor may not amend any
lessee-related term in the sales contract concluded
by it according to the lessee's selection of the
seller and the lease item.
Article 242
Exclusion of Lease Item from Bankruptcy Assets of
Lessee
Title to the lease
item vests in the lessor. In case the lessee enters
into bankruptcy, the lease item is not part of its
bankruptcy assets.
Article 243
Determination of Rental Components
Unless otherwise
agreed by the parties, the rent under a financial
leasing contract shall be determined based on the
major portion of or full costs of purchasing the
lease item and the lessor's reasonable profit.
Article 244 Lessor
Not Liable for Non-fitness of Lease Item; Exceptions
Where the lease
item does not comply with the contract or is not fit
for the intended purpose, the lessor is not liable,
except where the lessee relied on the skills of the
lessor in selecting the lease item or the lessor
interfered in the selection thereof.
Article 245
Warranty by Lessor
The lessor shall
give warranty in respect of the lessee's possession
and use of the lease item.
Article 246 Lessor
Not Liable for Damage or Injury
If while in the
possession of the lessee, the lease item caused
personal injury or property damage to any third
person, the lessor is not liable.
Article 247
Lessee's Obligation of Due Care; Maintenance
Obligations
The lessee shall
keep and use the lease item with due care.
While in
possession of the lease item, the lessee shall
perform the obligations of maintenance and repair
thereof.
Article 248 Lessor'
s Remedies in Case of Non-payment by Lessee
The lessee shall
pay the rent in accordance with the contract. Where
the lessee fails to pay the rent within a reasonable
period after receiving demand for payment from the
lessor, the lessor may require payment of the full
rent; or it may terminate the contract and repossess
the lease item.
Article 249
Partial Refund in Case of Termination by Lessor
Where the parties
agreed that title to the lease item will vest in the
lessee at the end of the lease term, and after
paying a major portion of the rent, the lessee is
unable to pay the remaining balance, resulting in
the lessor's termination of the contract and
repossession of the lease item, if the value of the
repossessed lease item exceeds the rent owed by the
lessee and other expenses, the lessee may require
partial refund.
Article 250
Ownership of Lease Item at End of Lease Term
The lessor and the
lessee may agree on the ownership of the lease item
at the end of the lease term. Where ownership of the
lease item was not prescribed or clearly prescribed,
and cannot be determined in accordance with Article
61 hereof, title to the lease item shall vest in the
lessor.
Chapter Fifteen:
Contracts of Hired Works
Article 251
Definition of Contract of Hired Work
A contract of
hired work is a contract whereby the hiree completes
certain work as required by the hirer and delivers
the work product, and the hirer pays the
remuneration.
Hired works
include works such as processing, custom-made work,
repair, reproduction, testing, and inspection, etc.
Article 252 Terms
of Contract of Hired Work
A contract of
hired work includes terms such as the subject matter
of hire, quantity, quality, remuneration, method of
hire, supply of materials, time of performance,
standard applicable to and method of acceptance
inspection, etc.
Article 253 Use of
Hiree's Own Resources; Delegation of Main Task
Subject to Consent
The hiree shall
use its own equipment, skills and labor to complete
the main tasks, except otherwise agreed by the
parties.
Where the hiree
has delegated a main task of the hired work to a
third person for completion, it shall be responsible
to the hirer for the work product completed thereby;
if the delegation was not approved by the hirer, the
hirer may also terminate the contract.
Article 254
Delegation of Ancillary Task by Hiree
The hiree may
delegate any ancillary task of the hired work to a
third person for completion. Where the hiree
delegated any ancillary task of the hired work to a
third person for completion, it shall be responsible
to the hirer for the work product completed thereby.
Article 255
Materials Supplied by Hiree Subject to Inspection
Where the hiree is
to supply the materials, it shall select the
materials in accordance with the contract and shall
make such materials available for inspection by the
hirer.
Article 256
Hiree's Timely Inspection of Materials Supplied by
Hirer
Where the hirer is
to supply the materials, it shall supply the
materials in accordance with the contract. The hiree
shall timely inspect the materials supplied by the
hirer, and where non-compliance is discovered, it
shall timely instruct the hirer to replace or
supplement the materials or otherwise cure the
non-compliance.
The hiree may not
replace the materials supplied by the hirer without
authorization, and may not replace any component
which does not require repair.
Article 257
Hiree's Remedies in Case of Hirer's Delay in
Responding
Where the hiree
discovers that the drawings or technical
requirements provided by the hirer are unreasonable,
it shall timely notify the hirer. Where the hiree
sustains any loss due to reasons such as the hirer's
delay in responding, etc., the hirer shall pay
damages.
Article 258 Hirer
Responsible for Its Change of Requirements
Where the hirer
changed its requirements for the hired work while
the work was under way, thereby causing loss to the
hiree, the hirer shall indemnify the hiree.
Article 259
Hirer's Obligation to Assist in Performance
Where performance
of the hired work requires assistance by the hirer,
it is obligated to provide assistance. Where the
hired work is not capable of being completed due to
failure by the hirer to fulfill its obligation to
assist, the hiree may demand performance from the
hirer within a reasonable period and extend the time
of its own performance; where the hirer fails to
perform at the end of such period, the hiree may
terminate the contract.
Article 260
Hirer's Right to Monitor
In the course of
performing the hired work, the hiree shall consent
to any necessary monitoring and inspection by the
hirer. Any monitoring or inspection conducted by the
hirer may not impair the normal work of the hiree.
Article 261
Delivery of Work Product by Hiree
Upon completion of
the hired work, the hiree shall deliver the work
product to the hirer and shall submit thereto the
required technical materials and related quality
certificate. The hirer shall conduct acceptance
inspection of the work product.
Article 262
Hirer's Remedies in Case of Quality Non-compliance
Where the work
product delivered by the hiree fails to meet the
quality requirements, the hirer may require the
hiree to assume liabilities for breach of contract
by way of repair, remaking, reduction in
remuneration, or payment of damages.
Article 263 Time
of Payment of Remuneration
The hirer shall
pay the remuneration at the prescribed time. Where
the time of payment was not prescribed or clearly
prescribed, and cannot be determined in accordance
with Article 61 hereof, the hirer shall make payment
at the time of the hiree's delivery of the work
product; where the work product is partially
delivered, the hirer shall make payment accordingly.
Article 264
Hiree's Possessory Lien in Case of Non-Payment
Where the hirer
fails to pay the remuneration or cost of materials,
etc. to the hiree, the hiree is entitled to a
possessory lien on the work product completed,
except otherwise agreed by the parties.
Article 265
Hiree's Obligation of Due Care for Materials and
Work Product
The hiree shall
keep the materials supplied by the hirer and the
completed work product with due care, and shall be
liable for damages in case of any damage or loss due
to improper care.
Article 266
Hiree's Confidentiality Obligations
The hiree shall
keep the relevant information confidential as
required by the hirer, and may not retain any
replica or technical material without permission by
the hirer.
Article 267
Liability of Joint Hirees
Joint hirees are
jointly and severally liable to the hirer, except
otherwise agreed by the parties.
Article 268
Hirer's Termination Right Subject to Indemnification
The hirer may
terminate the contract of hired work at any time,
provided that it shall indemnify the hiree for its
loss as a result, if any.
Chapter Sixteen:
Contracts for Construction Projects
Article 269
Definition of Contract for Construction Project
A contract for
construction project is a contract whereby the
contractor performs project construction, and the
developer pays the price.
Contracts for
construction projects include contracts for survey,
design, and construction.
Article 270
Writing Requirement
A contract for
construction project shall be in writing.
Article 271
Tendering Process in Construction Project
Tendering for a
construction project shall be conducted in an open,
fair and impartial manner in accordance with the
relevant laws.
Article 272
Contracting and Subcontracting in Construction
Projects
The developer may
enter into a contract for construction project with
a prime contractor, or enter into contracts for
survey, design, and construction with the surveyor,
designer, and constructor respectively. The
developer may not divide a construction project
which should be completed by one contractor into
several parts and contract them out to several
contractors.
Subject to consent
by the developer, the prime contractor or the
contractor for survey, design, or construction may
delegate part of the contracted work to a third
person. The third person and the prime contractor or
the contractor for survey, design, or construction
shall be jointly and severally liable to the
developer in respect of the work product completed
by such third person. The contractor may not assign
in whole to any third person the contracted
construction project, or divide the whole contracted
construction project into several parts and
separately assign each part to a third person under
the guise of sub-contracting.
The contractor is
prohibited from sub-contracting any part of the
project to an entity not appropriately qualified. A
sub-contractor is prohibited from further
sub-contracting its contracted work. The main
structure of the construction project must be
constructed by the contractor itself.
Article 273 Major
State Construction Projects
A contract for a
major state construction project shall be concluded
in accordance with the procedure prescribed by the
state and in compliance with the state-approved
documents such as the investment plan and
feasibility studies report, etc.
Article 274 Terms
of Contract for Survey or Design
A contract for
survey or design includes terms such as the time
limit for submission of the relevant basic
information and documents (including budget
estimate), the quality requirements, fees, and other
conditions of cooperation, etc.
Article 275 Terms
of Construction Contract
A construction
contract includes terms such as the scope of the
project, the construction period, the time for
commencement and completion of any work to be
commissioned in the interim, the quality of the
project, the cost of the project, the time for
delivery of technical materials, the
responsibilities for the supply of materials and
equipment, the appropriation of funds and settlement
of account, inspection upon completion of the
project, the scope and period of quality warranty,
and cooperation between the parties, etc.
Article 276
Supervision of Construction Project
Where the
construction project is subject to supervision, the
developer shall enter into an agency appointment
contract for project supervision with a project
supervisor in writing. The rights, obligations and
associated legal liabilities of the developer and
supervisor shall be prescribed in accordance with
the provisions hereof concerning agency appointment
contracts and the provisions of other relevant laws
and administrative regulations.
Article 277
Developer's Right to Inspect
Provided that the
developer does not interfere with the normal
operation of the contractor, it may inspect the
progress and quality of the work at any time.
Article 278
Concealed Work
In the case of
concealed work, the contractor shall give the
developer notice for inspection prior to
concealment. Where the developer fails to timely
conduct inspection, the contractor may extend the
relevant project milestones, and is entitled to
claim damages for work stoppage or work slowdown,
etc.
Article 279
Inspection of Completed Project; No Use Prior to
Inspection
Upon completion of
the construction project, the developer shall
conduct acceptance inspection according to the
construction drawings and specifications, and in
accordance with the rules of construction inspection
and quality inspection standard prescribed by the
state. Once the construction project has passed the
acceptance inspection, the developer shall pay the
prescribed price and accept the construction
project.
The completed
construction project may be put into use only after
it has passed the acceptance inspection; if the
construction project has not been inspected or has
failed the inspection, it may not be put into use.
Article 280
Developer's Remedies in Case of Non-compliant Survey
or Design
Where the
developer sustains any loss from construction delay
due to non-compliance of the survey or design or due
to delayed delivery of the survey or design
documents, the surveyor or the designer shall
continue to improve the survey or design, reduce or
forgo the survey fee or design fee, and pay damages.
Article 281
Developer's Remedies in Case of Non-conforming
Construction
Where the
construction project fails to meet the prescribed
quality requirements due to any reason attributable
to the constructor, the developer is entitled to
require the constructor to repair, re-construct or
make alteration free of charge within a reasonable
time. Where delivery of the project is delayed due
to such repair, re-construction or alteration, the
constructor shall be liable for breach of contract.
Article 282
Contractor Liable for Personal and Property Damage
Where the
construction project caused personal injury and
property damage during its reasonable usage period
due to any reason attributable to the contractor,
the contractor shall be liable for damages.
Article 283
Contractor's Remedies in Case of Developer's Failure
to Provide Necessary Conditions
Where the
developer fails to provide raw materials, equipment,
site, funds, or technical information at the
prescribed time and in accordance with the
contractual requirements, the contractor may extend
the relevant project milestones, and is entitled to
claim damages for work stoppage or slowdown, etc.
Article 284
Contractor's Remedies in Case of Project
Interruption Due to Reasons Attributable to
Developer
If an ongoing
project is stopped or delayed due to any reason
attributable to the developer, the developer shall
take the appropriate measures to make up or mitigate
the loss, and shall indemnify the contractor for its
loss and out-of-pocket expenses arising from
resulting work stoppage, slowdown, reshipment,
re-dispatch of mechanical equipment, and excess
inventory of materials and assemblies, etc.
Article 285
Surveyor's Remedies in Case of Developer's Failure
to Cooperate
Where in the
course of survey or design, any repeating work, work
stoppage or change of design occurs due to the
developer's change of plan, the incorrect
information provided by it, or its failure to
provide the working conditions necessary for the
survey or design at the prescribed time, the
developer shall increase the fees in light of the
actual amount of work done by the surveyor or
designer.
Article 286
Contractor's Remedies in Case of Developer's Failure
to Pay Price
If the developer
failed to pay the price in accordance with the
contract, the contractor may demand payment from the
developer within a reasonable period. Where the
developer fails to pay the price at the end of such
period, the contractor may enter into an agreement
with the developer to liquidate the project, and may
also petition the People's Court to auction the
project in accordance with the law, unless such
project is not fit for liquidation or auction in
light of its nature.
The construction
project price shall be paid in priority out of
proceeds from the liquidation or auction of the
project.
Article 287
Provisions Governing Contracts of Hired Works
Applicable
A matter not
provided for in this Chapter shall be governed by
the relevant provision governing contracts of hired
works.
Chapter
Seventeen: Carriage Contracts
Section One
General Provisions
Article 288
Definition of Carriage Contract
A carriage
contract is a contract whereby the carrier carries
the passenger or cargo from the place of departure
to the prescribed destination, and the passenger,
consignor or consignee pays the fare or freightage.
Article 289 Common
Carrier May Not Deny Reasonable Carriage Requirement
A common carrier
may not deny any normal and reasonable carriage
requirement by a passenger or consignor.
Article 290
Obligation of Carrier to Carry in Safe and Timely
Manner
The carrier shall
safely carry the passenger or cargo to the
prescribed destination within the prescribed time or
within a reasonable time.
Article 291
Obligation of Carrier to Travel by Prescribed Route
The carrier shall
carry the passenger or cargo to the prescribed
destination by the prescribed route or the normal
route.
Article 292
Passenger's Remedies in Case of Carrier's Failure to
Travel by Prescribed Route
The passenger,
consignor or consignee shall pay the fare or
freightage. Where the carrier failed to carry the
passenger or the cargo by the prescribed or normal
route, thereby increasing the fare or freightage,
the passenger, consignor or consignee may refuse to
pay any increased portion thereof.
Section Two
Passenger Carriage Contracts
Article 293
Formation of Passenger Carriage Contract
A passenger
carriage contract is formed upon the carrier's
delivery of the passenger ticket to the passenger,
except otherwise agreed by the parties or provided
by the relevant usage.
Article 294
Carrier's Remedies in Case of Passenger's Failure to
Pay Fare
The passenger
shall board the mode of transportation with a valid
passenger ticket. If the passenger boards without a
ticket, travels beyond the prescribed destination,
boards a class higher than the prescribed class, or
boards with an expired ticket, he shall pay the fare
retroactively, and the carrier may charge additional
fare in accordance with the relevant stipulations.
Where the passenger fails to pay the fare, the
carrier may refuse to carry.
Article 295
Passenger's Failure to Board on Time
Where the
passenger is unable to board the mode of
transportation at the time prescribed on the
passenger ticket due to any reason attributable to
himself, he shall carry out the formality for ticket
refund or reschedule within the prescribed period.
Where the passenger delays in carrying out the
relevant formality, the carrier may refuse to refund
the fare, and is no longer obligated to carry such
passenger.
Article 296
Carry-on Luggage
In the course of
carriage, the passenger's carry-on luggage shall be
within the prescribed limit. Where his luggage
exceeds the prescribed limit on carry-on luggage,
the additional luggage shall be checked in.
Article 297
Boarding with Prohibited Item
The passenger may
not carry in person, or place in his luggage, any
hazardous material which is flammable, explosive,
toxic, corrosive, or radioactive, etc., or possibly
endangers people or property on board, or an
otherwise prohibited item.
Where the
passenger violates the previous paragraph, the
carrier may unload, destroy or turn over to the
relevant authority the prohibited item. Where the
passenger insists on carrying in person or placing
in his luggage the prohibited item, the carrier
shall refuse to carry.
Article 298
Carrier's Obligation to Inform
The carrier shall
timely inform the passenger of any major cause
preventing it from normal carriage, as well as
precautions relating to transportation safety.
Article 299
Passenger's Remedies in Case of Delay
The carrier shall
carry the passenger according to the time and
carrier number prescribed on the passenger ticket.
Where the carrier delays in carriage, it shall, upon
request by the passenger, either reschedule or
refund the fare.
Article 300
Passenger's Remedies in Case of Unilateral Change of
Mode of Transportation by Carrier
Where the carrier
unilaterally changed the mode of transportation,
thereby lowering the standard of service, it shall,
upon request by the passenger, refund or reduce the
fare; where the service standard is enhanced as a
result, no additional fare shall be charged.
Article 301
Carrier's Obligation to Assist Passenger
In the course of
carriage, the carrier shall use its best effort to
assist any passenger who has a medical emergency, is
in labor or encounters a dangerous situation.
Article 302
Carrier Liable for Injury of Passenger; Exceptions
The carrier shall
be liable for damages in case of injury or death of
the passenger in the course of carriage, except
where such injury or death was attributable to the
passenger's own health, or the carrier has
established that such injury or death was caused by
the passenger's intentional misconduct or gross
negligence.
The provisions in
the previous paragraph apply to a passenger who is
exempted from buying a ticket or holds a discount
ticket pursuant to the relevant stipulations, or who
is permitted by the carrier to board without a
ticket.
Article 303
Provisions Governing Loss of Passenger's Luggage
Where the
passenger's carry-on luggage was damaged or lost in
the course of carriage, the carrier shall be liable
for damages if it was at fault.
Where the
passenger's check-in luggage was damaged or lost,
the relevant provisions governing cargo carriage
apply.
Section Three
Cargo Carriage Contracts
Article 304
Consignor's Obligation to Inform; Liability for
Misrepresentation
In consigning its
cargo, the consignor shall correctly provide the
carrier with the name of the consignee or the
consignee to whose order the cargo is deliverable,
as well as any necessary information relating to
carriage of the cargo, such as the name, nature,
weight, and quantity of the cargo and the place for
taking delivery thereof.
Where the carrier
sustains any loss due to the consignor's provision
of false information or omission of any material
information, the consignor shall be liable for
damages.
Article 305
Certain Cargo Carriage Subject to Approval
Where carriage of
the cargo is subject to any procedure such as
approval or inspection, etc., the consignor shall
submit to the carrier the relevant documents
evidencing completion of such procedure.
Article 306
Packing of Cargo in Prescribed Manner
The consignor
shall pack the cargo in the prescribed manner. Where
a packing method was not prescribed or clearly
prescribed, Article 156 hereof applies.
Where the
consignor violates the previous paragraph, the
carrier may refuse to carry.
Article 307
Carriage of Hazardous Materials
In consigning any
hazardous material which is inflammable, explosive,
toxic, corrosive, or radioactive, etc., the
consignor shall, in accordance with the stipulations
of the state governing the carriage of hazardous
materials, properly pack the hazardous material and
affix thereon applicable signs and labels for
hazardous materials, and shall submit its name and
nature as well as related precautionary measures to
the carrier in writing.
If the consignor
violates the previous paragraph, the carrier may
refuse to carry, and may also take the appropriate
measures to prevent loss at the consignor's expense.
Article 308
Consignor's Right of Disposal Prior to Delivery
Prior to carrier's
delivery of the cargo to the consignee, the
consignor may require the carrier to suspend the
carriage, return the cargo, change the destination
or deliver the cargo to another consignee, provided
that it shall indemnify the carrier for any loss it
sustains as a result.
Article 309 Taking
Delivery of Cargo by Consignee
Upon arrival of
the cargo, if the carrier knows of the consignee, it
shall timely notify the consignee, who shall timely
take delivery. Where the consignee delays in taking
delivery, it shall pay expenses such as safekeeping
fee, etc. to the carrier.
Article 310
Inspection by Consignee; Effect of Failure to
Inspect
Upon taking
delivery of the cargo, the consignee shall inspect
the cargo at the prescribed time. Where the time for
inspection was not prescribed or clearly prescribed,
and cannot be determined in accordance with Article
61 hereof, the consignee shall inspect the cargo
within a reasonable time. The consignee's failure to
raise any objection concerning the quantity of, or
any damage to, the cargo within the prescribed time
or within a reasonable time is deemed prima facie
evidence of delivery by the carrier in compliance
with the description in the transportation
documents.
Article 311
Carrier Liable for Damage or Loss during Carriage;
Exceptions
The carrier is
liable for damages in case of damage to or loss of
the cargo in the course of carriage, provided that
it is not liable for damages if it has established
that such damage to or loss of the cargo was caused
by force majeure, the intrinsic characteristics of
the cargo, reasonable depletion, or the fault of the
consignor or consignee.
Article 312 Amount
of Damages in Case of Loss of Cargo
Where the parties
agreed on the amount of damages in case of damage to
or loss of the cargo, the damages payable is the
prescribed amount; if the amount of damages was not
prescribed or clearly prescribed, and cannot be
determined in accordance with Article 61 hereof, it
shall be calculated based on the prevailing market
price at the destination when the cargo was or
should have been delivered. Where a law or
administrative regulation provides otherwise in
respect of the method for calculation of damages and
any limitation on damages, such provisions apply.
Article 313
Liabilities of Joint Carriers Using the Same Method
of Transportation
Where two or more
carriers jointly carry the cargo using the same
method of transportation, the carrier contracting
with the consignor shall be responsible for the
whole course of carriage. Where the loss occurred at
a particular segment, the carrier contracting with
the consignor and the carrier for such segment are
jointly and severally liable.
Article 314
Freightage in Case of Force Majeure
Where the cargo
was lost in the course of carriage due to force
majeure, if the freightage has not been collected,
the carrier may not require payment thereof; if the
freightage has been collected, the consignor may
claim refund.
Article 315
Carrier's Possessory Lien in Case of Non-payment
Where the
consignor or consignee fails to pay the freightage,
safekeeping fee and other expenses in connection
with the carriage of the cargo, the carrier is
entitled to a possessory lien on the corresponding
portion of the cargo, except otherwise agreed by the
parties.
Article 316
Placing Cargo in Escrow
Where the
consignee is not known or refuses to take delivery
of the cargo without cause, the carrier may place
the cargo in escrow under Article 101 hereof.
Section Four
Multi-modal Carriage Contract
Article 317 Rights
and Obligations of Multi-modal Carriage Operator
A multi-modal
carriage operator is responsible for performing, or
arranging for performance of, the multi-modal
carriage contract, and it enjoys the rights and
assumes the obligations of a carrier throughout the
course of carriage.
Article 318
Agreement between Multi-modal Carriage Operator and
Segment Carriers
The multi-modal
carriage operator and the segment carriers may
prescribe their respective duties concerning each
segment, provided that the obligations of the
multi-modal carriage operator with respect to the
entire course of carriage are not affected by any
such agreement.
Article 319
Multi-modal Carriage Document
Upon receipt of
the cargo delivered by the consignor, the
multi-modal carriage operator shall issue thereto a
multi-modal carriage document. The multi-modal
carriage document may either be assignable or
non-assignable as required by the consignor.
Article 320
Consignor's Liability Notwithstanding Assignment of
Document
Where the
multi-modal carriage operator sustains any loss due
to the fault of the consignor in the course of
consigning the cargo, the consignor shall be liable
for damages notwithstanding its subsequent
assignment of the multi-modal carriage document.
Article 321
Applicable Law Governing Loss of Cargo in
Multi-modal Carriage
Where damage to or
loss of the cargo occurred within a particular
segment of the course of a multi-modal carriage, the
multi-modal carriage operator's liability for
damages and any limitation thereon are governed by
the applicable transportation law of the
jurisdiction which such segment is under. Where the
segment in which the cargo was damaged or lost
cannot be determined, the liability for damages
shall be borne in accordance with this Chapter.
Chapter Eighteen
Technology Contracts
Section One
General Provisions
Article 322
Definition of Technology Contract
A technology
contract is a contract whereby the parties prescribe
their rights and obligations in respect of the
development or transfer of technology, or in respect
of technical consulting or service.
Article 323
General Requirements Concerning Technology Contract
Conclusion of a
technology contract shall be conducive to the
advancement of science and technology, and expedite
the conversion, application and dissemination of
scientific and technological achievements.
Article 324 Terms
of Technology Contract; Patents
Terms of a
technology contract shall be prescribed by the
parties, and generally include the following:
(i) project name;
(ii) contents,
scope and requirement of the subject matter;
(iii) the plan,
schedule, period, place, territory and method of
performance;
(iv)
confidentiality of technical information and
materials;
(v) allocation of
responsibilities for risks;
(vi) ownership of
the technology and allocation of benefits accrued
therefrom;
(vii) standard
applicable to and method of acceptance test;
(viii)price,
remuneration or licensing fee and the method of
payment;
(ix) liquidated
damages or method for calculation of damages;
(x) method of
dispute resolution;
(xi) definition of
terms and phrases.
The parties may
agree to include the following materials relating to
the performance of the contract as an integral part
thereof: technical background information,
feasibility studies and technical evaluation report,
project task matrix and project plan, technical
standard, technical specifications, original design
and technique documents, as well as other technical
documentation.
Where the
technology contract involves any patent, it shall
set forth the name of the invention/innovation, the
patent applicant and the patentee, the date of
application, the application number, patent number
and the term of the patent.
Article 325
Payment Method; Royalty
The method for
payment of the price, remuneration or licensing fee
under a technology contract shall be prescribed by
the parties, who may prescribe lump-sum payment
based on one-time calculation or installment payment
based on one-time calculation, and may also
prescribe royalty payment or royalty payment plus
advance payment of initial fee.
Where a royalty
payment method is prescribed, the royalty may be
calculated as a percentage of the product price, any
increase in product value resulting from
exploitation of the patent or use of the technical
secret, profit, or product sales, and may also be
calculated by any other method prescribed by the
parties. The royalty rate may be fixed or subject to
annual increase or decrease.
Where a royalty
payment is prescribed, the parties shall prescribe
in the contract a method for inspection of the
relevant accounting books.
Article 326
Employee-developed Technology; Definition
Where the right to
use and the right to transfer employee-developed
technology belong to a legal person or an
organization of any other nature, the legal person
or organization may enter into a technology contract
in respect of such employee-developed technology.
The legal person or organization shall reward or
remunerate the individual(s) who developed the
technology with a percentage of the benefits accrued
from the use and transfer of the employee-developed
technology. Where the legal person or organization
is to enter into a technology contract for the
transfer of the employee-developed technology, the
employee-developer has the right of first refusal
under the same conditions.
An
employee-developed technology is a technology
developed in the course of completing a task
assigned by a legal person or an organization of any
other nature, or developed by primarily utilizing
the material and technical resources thereof.
Article 327
Non-employee-developed Technology
The right to use
and the right to transfer non-employee-developed
technology belong to the individual developer, who
may enter into a technology contract in respect
thereof.
Article 328
Individual's Rights with Respect to Technology
Developed Thereby
The individual who
developed the technology is entitled to identify
himself as the developer in the documentation
related thereto, and to receive honor certificate
and reward.
Article 329
Invalidity of Technology-monopolizing and Infringing
Contract
A technology
contract which illegally monopolizes technology,
impairs technological advancement or infringes on
the technology of a third person is invalid.
Section Two
Technology Development Contract
Article 330
Definition of Technology Development Contract
A technology
development contract is a contract concluded in
respect of the development of a new technology,
product, technique or material and the associated
system.
Technology
development contracts include commissioned
development contracts and cooperative development
contracts.
A technology
development contract shall be in writing.
A contract on the
conversion of a scientific achievement with
potential for industrial application is governed by
reference to the provisions applicable to technology
development contracts.
Article 331
Obligations of Commissioning Party
The commissioning
party under a commissioned development contract
shall, in accordance with the contract, provide
development funds and pay remuneration; supply
technical materials and original data; complete its
tasks of cooperation; and accept the developed
technology.
Article 332
Obligations of Developer in Commissioned Development
The developer
under a commissioned development contract shall, in
accordance with the contract, prepare and implement
the development plan; use development funds in a
reasonable manner; timely complete the development
and deliver the developed technology, as well as
provide the relevant technical materials and
necessary technical guidance so as to help the
commissioning party master the developed technology.
Article 333
Commissioning Party's Breach
Where the
commissioning party breached the contract, thereby
causing stoppage, delay or failure of the
development, it shall be liable for breach of
contract.
Article 334
Developer's Breach
Where the
developer breached the contract, thereby causing
stoppage, delay or failure of the development, it
shall be liable for breach of contract.
Article 335
Obligations of Parties in Cooperative Development
Parties to a
cooperative development contract shall, in
accordance with the contract, make investment,
including investment in the form of technology;
participate in the development by performing their
respective tasks; and cooperate with each other in
the development.
Article 336 Breach
of Cooperative Contract
Where a party to a
cooperative development contract breached the
contract, thereby causing stoppage, delay or failure
of the development, it shall be liable for breach of
contract.
Article 337
Termination of Contract in Case Technology Becomes
Public
Where the
technology which is the subject matter of a
technology development contract was made public by a
third person, thereby rendering performance of the
technology development contract no longer
meaningful, the parties may terminate the contract.
Article 338
Allocation of Responsibility for Risk of Failure;
Duty to Inform upon Discovery of Circumstance Which
May Lead to Failure
If in the course
of implementing a technology development contract,
the development failed in whole or in part due to
any insurmountable technical difficulty, allocation
of the responsibility for such risk shall be
prescribed by the parties. Where the allocation of
responsibility for such risk was not prescribed or
clearly prescribed, and cannot be determined in
accordance with Article 61 hereof, it shall be
shared by the parties in a reasonable manner.
Where a party
discovers any circumstance which may lead to the
failure of the development in whole or in part as
described in the previous paragraph, it shall timely
notify the other party and take the appropriate
measures to mitigate loss; where the party failed to
timely notify the other party and take the
appropriate measures, thereby causing further loss,
it shall be liable for such further loss.
Article 339 Right
to Patent Application in Commissioned Development
Unless otherwise
agreed by the parties, the right to apply for patent
on the invention/innovation resulting from a
commissioned development belongs to the developer.
Where the developer is granted a patent, the
commissioning party may exploit such patent free of
charge.
Where the
developer is to assign the right to apply for patent
on the invention/innovation resulting from the
commissioned development, the commissioning party
has the right of first refusal under the same
conditions.
Article 340 Right
to Patent Application in Cooperative Development
Unless otherwise
agreed by the parties, the right to apply for patent
on the invention/innovation resulting from a
cooperative development belongs to the parties
therein jointly. Where a party is to assign its
joint patent application right, the other parties
have the right of first refusal under the same
conditions.
Where a party in
the cooperative development declares a waiver of its
joint patent application right, the other party may
apply by itself, or the other parties may jointly
apply, as the case may be. Where a patent is granted
on the invention/innovation, the party waiving its
patent application right may exploit such patent
free of charge.
If a party in the
cooperative development does not consent to the
application for patent, the other party or parties
may not apply for patent.
Article 341 Right
to Use or Transfer Technical Secret
The right to use
and transfer the technical secret resulting from a
commissioned or cooperative development, and the
method for allocation of benefits accrued therefrom
shall be prescribed by the parties. Where such
matters were not prescribed or clearly prescribed,
and cannot be determined in accordance with Article
61 hereof, all of the parties are entitled to use
and transfer the technology, provided that the
developer in a commissioned development may not
transfer the technology to a third person before it
delivers the technology to the commissioning party.
Section Three
Technology Transfer Contracts
Article 342 Types
of Technology Transfer Contract
Technology
transfer contracts include contracts for the
assignment of patent, assignment of patent
application right, transfer of technical secrets,
and patent licensing.
A technology
transfer contract shall be in writing.
Article 343 Limit
on Scope of Implementation May Not Restrict
Competition
A technology
transfer contract may set forth the scope of
exploitation of the patent or the use of the
technical secret by the transferor and the
transferee, provided that it may not restrict
technological competition and technological
development.
Article 344 Term
of Patent Licensing Contract May Not Exceed Patent
Term
A patent licensing
contract is only valid during the term of the
patent. Where the term of the patent expires or the
patent is invalidated, the patentee may not enter
into a patent licensing contract with any other
person in respect thereof.
Article 345
Obligations of Patent Licensor
The transferor
under a patent licensing contract shall, in
accordance with the contract, license the patent to
the transferee, deliver the technical materials
related to the exploitation of the patent, and
provide the necessary technical guidance.
Article 346
Obligations of Patent Licensee
The transferee
under a patent licensing contract shall exploit the
patent in accordance with the contract and may not
license the patent to any third person except as
provided in the contract; and shall pay the
licensing fee in accordance with the contract.
Article 347
Obligations of Transferor of Technical Secret
The transferor
under a contract for transfer of technical secret
shall, in accordance with the contract, supply the
technical materials, provide technical guidance, and
warrant the practical applicability and reliability
of the technology, and shall abide by its
confidentiality obligations.
Article 348
Obligations of Transferee of Technical Secret
The transferee
under a contract for transfer of technical secret
shall, in accordance with the contract, use the
technology, pay the licensing fee and abide by its
confidentiality obligations.
Article 349
Warranty of Title, Completeness, Correctness and
Effectiveness
The transferor
under a technology transfer contract shall warrant
that it is the lawful owner of the technology
provided, and shall warrant that the technology
provided is complete, free from error, effective,
and capable of achieving the prescribed goals.
Article 350
Transferee's Confidentiality Obligations
The transferee
under a technology transfer contract shall, to the
prescribed extent and within the prescribed period,
abide by its confidentiality obligations in respect
of the non-public and secret portion of the
technology provided by the transferor.
Article 351
Transferor's Liabilities for Breach
Where the
transferor failed to transfer technology in
accordance with the contract, it shall refund the
licensing fee in part or in whole, and shall be
liable for breach of contract; where the transferor
exploited the patent or used the technical secret
beyond the prescribed scope, or unilaterally allowed
the patent to be exploited or the technical secret
to be used by a third person in breach of the
contract, it shall cease the breach and be liable
for breach of contract; where the transferor
breached any prescribed confidentiality obligation,
it shall be liable for breach of contract.
Article 352
Transferee's Liabilities for Breach
Where the
transferee failed to pay the prescribed licensing
fee, it shall pay the overdue licensing fee and pay
liquidated damages in accordance with the contract;
where it failed to pay the overdue licensing fee and
liquidated damages, it shall cease exploitation of
the patent or use of the technical secret, return
the technical materials, and be liable for breach of
contract; where the transferee exploited the patent
or used the technical secret beyond the prescribed
scope, or allowed the patent to be exploited or the
technical secret to be used by a third person
without consent by the transferor in breach of the
contract, it shall cease the breach and be liable
for breach of contract; where the transferee
breached any prescribed confidentiality obligation,
it shall be liable for breach of contract.
Article 353
Transferor Liable in Case of Infringement; Exception
Where the
exploitation of the patent or the use of the
technical secret by the transferee in accordance
with the contract infringes on the lawful interests
of any other person, the liability shall be borne by
the transferor, except otherwise agreed by the
parties.
Article 354
Sharing of Improvement
The parties may,
on the basis of mutual benefit, provide in the
technology transfer contract for the method of
sharing any subsequent improvement resulting from
the exploitation of the patent or use of the
technical secret. If such method was not prescribed
or clearly prescribed, and cannot be determined in
accordance with Article 61 hereof, neither party is
entitled to share any subsequent improvement made by
the other party.
Article 355
Applicability of Other Laws or Administrative
Regulations
Where the relevant
laws or administrative regulations provide otherwise
in respect of technology import/export contracts or
in respect of patent contracts or contracts for
patent application, such provisions prevail.
Section Four
Technical Consulting Contracts and Technical Service
Contracts
Article 356
Definitions of Technical Consulting and Technical
Service Contracts
Technical
consulting contracts include contracts for provision
of feasibility studies, technical forecast,
specialized technical investigation, and analysis
and evaluation report, etc. in respect of a
particular technical project.
A technical
service contract means a contract whereby one party
solves a particular technical problem for the other
party by utilizing its technical knowledge,
excluding a contract for construction project or a
contract of hired work.
Article 357
Obligations of Client under Technical Consulting
Contract
The client under a
technical consulting contract shall, in accordance
with the contract, describe the problem on which
consultancy is sought, provide the technical
background information as well as related technical
materials and data; and accept the work product
from, and pay the remuneration to, the consultant.
Article 358
Obligations of Consultant under Technical Consulting
Contract
The consultant
under a technical consulting contract shall complete
the consulting report or answer the question within
the prescribed period; the consulting report
submitted shall comply with the requirements set
forth in the contract.
Article 359
Remedies for Breach; Consultant Not Liable for Loss
Where the client
under a technical consulting contract failed to
provide the necessary materials and data in
accordance with the contract, thereby impairing the
progress and quality of the work, or failed to
accept or delayed in accepting the work product, it
may not claim refund of the remuneration paid, and
shall pay any unpaid remuneration.
Where the
consultant under the technical consulting contract
failed to provide the consulting report within the
prescribed period or the consulting report submitted
does not comply with the contract, it shall be
liable for breach of contract by way of reducing or
foregoing the remuneration, etc.
The client under a
technical consulting contract shall bear the loss
resulting from any decision made by it based on the
complying consulting report and opinion provided by
the consultant, except otherwise agreed by the
parties.
Article 360
Obligations of Client under Technical Service
Contract
The client under a
technical service contract shall, in accordance with
the contract, provide the working conditions and
complete its tasks of cooperation; accept the work
product and pay the remuneration.
Article 361
Obligations of Service Provider under Technical
Service Contract
The service
provider under a technical service contract shall,
in accordance with the contract, complete the
services, solve the technical problem, warrant the
quality of its work, and communicate the knowledge
for solving the technical problem.
Article 362
Remedies for Breach
Where the client
under a technical service contract failed to perform
its contractual obligations, or rendered
non-conforming performance, thereby impairing the
progress and quality of the work, or failed to
accept or delayed in accepting the work product, it
may not claim refund of the remuneration paid, and
shall pay any unpaid remuneration.
Where the service
provider under a technical service contract failed
to complete services in accordance with the
contract, it shall be liable for breach of contract
by way of forgoing the remuneration, etc.
Article 363
Ownership of New Technology in Connection with
Technical Consulting/Service Contract
In the course of
performing a technical consulting contract or a
technical service contract, any new technology
developed by the consultant or service provider
utilizing the technical materials and working
conditions provided by the client belongs to the
consultant or service provider. Any new technology
developed by the client utilizing the work product
provided by the consultant or service provider
belongs to the client. However, if the parties agree
otherwise in the contract, such provision prevails.
Article 364
Technology Intermediary Service or Technical
Training
Where a relevant
law or administrative regulation provides otherwise
in respect of technology intermediary service
contracts or technical training contracts, such
provisions prevail.
Chapter Nineteen:
Safekeeping Contracts
Article 365
Definition of Safekeeping Contract
A safekeeping
contract is a contract whereby the depository keeps
the deposit delivered by the depositor, and
eventually returns it thereto.
Article 366
Safekeeping Fee
The depositor
shall pay the safekeeping fee to the depository in
accordance with the contract.
Where the
safekeeping fee was not prescribed or clearly
prescribed, and cannot be determined in accordance
with Article 61 hereof, the safekeeping is
gratuitous.
Article 367
Formation of Safekeeping Contract
A safekeeping
contract is formed upon delivery of the deposit,
except otherwise agreed by the parties.
Article 368
Deposit Voucher
Upon the
depositor's delivery of the deposit to the
depository, the depository shall issue a deposit
voucher thereto, except otherwise provided by the
relevant usage.
Article 369 Place
and Manner of Safekeeping
The depository
shall keep the deposit with due care.
The parties may
prescribe the place and manner of safekeeping. The
place and manner of safekeeping may not be changed
without authorization, except in an emergency
situation or for the purpose of safeguarding the
depositor's interests.
Article 370
Depositor's Obligation to Inform
Where the deposit
delivered by the depositor has defects or requires
special safekeeping measures in light of its nature,
the depositor shall inform the depository of the
relevant situation. Where the depositor failed to
inform, thereby causing damage to the deposit, the
depository is not liable for damages; where the
depository sustains any loss as a result, the
depositor shall be liable for damages, except where
the depository was, or should have been, aware of
the situation and failed to take remedial measures.
Article 371
Delegation of Safekeeping Prohibited Except with
Prior Agreement
The depository may
not delegate safekeeping of the deposit to a third
person, except otherwise agreed by the parties.
Where the
depository delegated safekeeping of the deposit to a
third person in violation of the previous paragraph,
thereby causing damage to the deposit, the
depository shall be liable for damages.
Article 372 Use of
Deposit Prohibited Except with Prior Agreement
The depository may
not use, or allow to be used, the deposit, except
otherwise agreed by the parties.
Article 373
Depository's Obligations in Case of Third Party
Claim
Where a third
person makes a claim on the deposit, the depository
shall perform its obligation of returning the
deposit to the depositor, except where an order of
preservation or enforcement is carried out in
respect of the deposit in accordance with the law.
Where a third
person has initiated a suit against the depository
or has applied for attachment of the deposit, the
depository shall timely notify the depositor.
Article 374
Depository Liable in Case of Damage or Loss;
Exception
If the deposit was
damaged or lost due to improper safekeeping by the
depository during the deposit period, the depository
shall be liable for damages, provided that if the
safekeeping is gratuitous, and the depository has
established that it was without gross negligence, it
is not liable for damages.
Article 375
Depositor's Obligation to Declare Valuable Deposit
Where the
depositor is to deposit money, securities, or any
other valuable item for safekeeping, it shall make a
declaration to the depository on such item, which
shall be inspected or sealed by the depository.
Where the depositor failed to make such declaration,
upon damage to or loss of the deposit, the
depository may indemnify the depositor to the extent
of the value of a regular item.
Article 376
Retrieval of Deposit
The depositor may
retrieve the deposit at any time.
Where a deposit
period was not prescribed or clearly prescribed, the
depository may require the depositor to retrieve the
deposit at any time; where a deposit period was
prescribed, absent special cause, the depository may
not require the depositor to retrieve the deposit
before the end of the deposit period.
Article 377
Depository's Obligation to Return Deposit and Fruit
At the end of the
deposit period, or if the depositor retrieves the
deposit before the end of the deposit period, the
depository shall return the original item together
with any fruit thereof to the depositor.
Article 378
Safekeeping of Fungible Items
Where the
depository keeps money deposit, it may return money
of the same type and quantity. Where the depository
keeps any other fungible item, it may return any
item of the same type, quality and quantity in
accordance with the contract.
Article 379 Time
of Payment of Safekeeping Fee
Under a
safekeeping contract for value, the depositor shall
pay to the depository the safekeeping fee at the
prescribed time.
Where the time of
payment of the safekeeping fee was not prescribed or
clearly prescribed, and cannot be determined in
accordance with Article 61 hereof, the safekeeping
fee shall be paid at the same time the deposit is
retrieved.
Article 380
Depository's Lien in Case of Non-payment
Where the
depositor fails to pay the safekeeping fee and other
expenses, the depository is entitled to a possessory
lien on the deposit, unless otherwise agreed by the
parties.
Chapter Twenty:
Warehousing Contracts
Article 381
Definition of Warehousing Contract
A warehousing
contract is a contract whereby the warehouser stores
the goods delivered by the depositor, and the
depositor pays the warehousing fee.
Article 382
Effectiveness of Warehousing Contract
A warehousing
contract becomes effective upon its formation.
Article 383
Storage of Hazardous Material
Where the
depositor intends to store any hazardous material
which is inflammable, explosive, toxic, corrosive,
or radioactive, etc., or any material susceptible to
deterioration, it shall describe the nature of the
goods and provide the relevant information.
Where the
depositor violates the previous paragraph, the
warehouser may reject the goods and may also take
the appropriate measures to prevent loss at the
depositor's expense.
Where the
warehouser is to store any hazardous material which
is inflammable, explosive, toxic, corrosive, or
radioactive, etc., it shall be equipped with the
appropriate safekeeping conditions.
Article 384
Inspection by Warehouser; Passing of Responsibility
The warehouser
shall, in accordance with the contract, conduct
warehouse-in inspection of the goods. Where in the
course of such inspection, the warehouser discovers
any non-compliance of the goods, it shall timely
notify the depositor. After inspection and
acceptance by the warehouser, if any non-compliance
in respect of the type, quantity or quality of the
goods occurs, the warehouser shall be liable for
damages.
Article 385
Warehouse Receipt
Upon the
depositor's delivery of the goods, the warehouser
shall issue thereto a warehouse receipt.
Article 386
Contents of Warehouse Receipt
The warehouser
shall sign or seal the warehouse receipt. The
warehouse receipt shall set forth the following:
(i) name and
domicile of the depositor;
(ii) the type,
quantity, quality, and packing method of the goods,
and the number of packages thereof and the marks
thereon;
(iii) the
depletion standard for the goods;
(iv) the
warehousing facility;
(v) the
warehousing period;
(vi) the
warehousing fee;
(vii) if the goods
are insured, the insured amount, term of insurance
and the name of the insurer;
(viii)the
preparing and issuing person and place and date of
preparation and issuance.
Article 387 Nature
and Assignability of Warehouse Receipt
The warehouse
receipt is the voucher for retrieving the goods.
Where the depositor or holder of the warehouse
receipt has endorsed the warehouse receipt and the
warehouser has signed or sealed thereon, the right
to retrieve the goods may be assigned.
Article 388
Warehouse Receipt Holder's Right to Inspect
Upon request by
the holder of the warehouse receipt, the warehouser
shall allow him to inspect the goods or take samples
therefrom.
Article 389
Obligation of Warehouser to Notify in Case of Damage
Where the
warehouser discovers that the warehoused goods are
deteriorating or are otherwise damaged, it shall
timely notify the depositor or holder of the
warehouse receipt.
Article 390
Warehouser's Obligations and Rights in Respect of
Deteriorating Goods
Where the
warehouser discovers that the warehoused goods are
deteriorating or are otherwise damaged, thereby
endangering other goods and normal safekeeping, it
shall demand disposal of the goods by the depositor
or the holder of the warehouse receipt as necessary.
In an emergency situation, the warehouser may
dispose of the goods as necessary, provided that
thereafter it shall timely notify the depositor or
holder of the warehouse receipt of the situation.
Article 391
Warehousing Period
Where the
warehousing period was not prescribed or clearly
prescribed, the depositor or holder of the warehouse
receipt may retrieve the goods at any time, and the
warehouser may require the depositor or holder of
the warehouse receipt to retrieve the goods at any
time, provided that the other party shall be given
the time required for preparation.
Article 392
Retrieval of Goods
At the end of the
warehousing period, the depositor or holder of the
warehouse receipt shall retrieve the goods by
presenting the warehouse receipt to the warehouser.
Where the
depositor or holder of the warehouse receipt delays
in retrieving the goods, additional warehousing fee
shall be charged; where the goods are retrieved
before the end of the warehousing period, the
warehousing fee shall not be reduced.
Article 393
Placing Goods in Escrow in Case of Failure to
Retrieve
At the end of the
warehousing period, if the depositor or holder of
the warehouse receipt failed to retrieve the goods,
the warehouser may demand retrieval within a
reasonable period, and if the goods are not
retrieved at the end of such period, the warehouser
may place the goods in escrow.
Article 394
Warehouser's Liabilities in Case of Damage to Goods
Where the goods
were damaged or lost during the warehousing period
due to improper safekeeping by the warehouser, it
shall be liable for damages.
If the goods
deteriorated or were damaged due to their nature,
non-conforming packing method, or storage beyond
their shelf-life, the warehouser is not liable for
damages.
Article 395
Provisions Governing Safekeeping Contracts
Applicable
A matter not
provided for in this Chapter shall be governed by
the relevant provision applicable to safekeeping
contracts.
Chapter Twenty
One: Agency Appointment Contracts
Article 396
Definition of Agency Appointment Contract
An agency
appointment contract is a contract whereby the
principal and the agent agree that the agent will
handle the principal's affairs.
Article 397 Scope
of Appointment
The principal may
specifically appoint the agent to handle one or more
of its affairs, or generally appoint the agent to
handle all of its affairs.
Article 398
Principal's Obligation to Prepay Expenses
The principal
shall prepay the expenses for handling the entrusted
affair. Any expense necessary for handling the
entrusted affair advanced by the agent shall be
repaid with interest by the principal.
Article 399
Agent's Obligation to Follow Instruction; Deviation
from Instruction
The agent shall
handle the entrusted affair in accordance with the
instruction of the principal. Any required deviation
from the principal's instruction is subject to
consent by the principal; in an emergency where the
agent has difficulty contacting the principal, the
agent shall properly handle the entrusted affair,
provided that thereafter the agent shall timely
notify the principal of the situation.
Article 400
Delegation of Agency Subject to Consent; Exceptions
The agent shall
personally handle the entrusted affair. Subject to
consent by the principal, the agent may delegate the
agency to a third person. If the delegation is
approved, the principal may issue instructions
concerning the entrusted affair directly to the
delegate, and the agent is only responsible for its
selection of the delegate or its own instruction
thereto. Where the agency is delegated without
consent, the agent shall be liable for any act of
the delegate, except in an emergency where the agent
needs to delegate the agency in order to safeguard
the interests of the principal.
Article 401
Agent's Obligation to Inform
Upon request by
the principal, the agent shall report on the
progress of the entrusted affair. Upon discharge of
the agency contract, the agent shall render an
account of the entrusted affair.
Article 402
Agent's Act Binding on Principal; Exceptions
Where the agent,
acting within the scope of authority granted by the
principal, entered into a contract in its own name
with a third person who was aware of the agency
relationship between the principal and agent, the
contract is directly binding upon the principal and
such third person, except where there is conclusive
evidence establishing that the contract is only
binding upon the agent and such third person.
Article 403
Agent's Non-performance toward Principal Due to Act
of Third Person; Non-performance toward Third Person
Due to Act of Principal
Where the agent
entered into a contract in its own name with a third
person who was not aware of the agency relationship
between the agent and the principal, if the agent
failed to perform its obligation toward the
principal due to any reason attributable to such
third person, the agent shall disclose the third
person to the principal, allowing it to exercise the
agent's rights against such third person, except
where the third person would not have entered into
the contract with the agent had it known the
identity of the principal.
Where the agent
failed to perform its obligation toward the third
person due to any reason attributable to the
principal, the agent shall disclose the principal to
the third person, allowing the third person to
select in alternative either the principal or the
agent as the other contract party against whom to
make a claim, provided that the third person may not
subsequently change its selection of the contract
party.
Where the
principal exercises the rights of the agent against
the third person, the third person may avail itself
of any defense it has against the agent. Where the
third person selects the principal as the other
party to the contract, the principal may avail
itself of any defense it has against the agent as
well as any defense the agent has against the third
person.
Article 404
Property Acquired by Agent
Any property
acquired by the agent in the course of handling the
entrusted affair shall be turned over to the
principal.
Article 405
Remuneration to Agent
Upon completion of
the entrusted affair by the agent, the principal
shall pay the remuneration thereto. Where the agency
appointment contract is terminated or the entrusted
affair is not capable of being completed due to any
reason not attributable to the agent, the principal
shall pay to the agent an appropriate amount of
remuneration. If the parties have agreed otherwise,
such agreement prevails.
Article 406
Liability of Agent; Unauthorized Act
Under an agency
appointment contract for value, if the principal
sustains any loss due to the fault of the agent, the
principal may claim damages. Under a gratuitous
agency appointment contract, if the principal
sustains any loss due to the agent's intentional
misconduct or gross negligence, the principal may
claim damages.
Where the agent
acted beyond the scope of authorization, thereby
causing loss to the principal, it shall pay damages.
Article 407 Agent
Entitled to Indemnification in Case of Loss
In the course of
handling the entrusted affair, if the agent sustains
any loss due to a reason not attributable to itself,
the agent may seek indemnification from the
principal.
Article 408
Additional Appointment by Principal Subject to
Consent
Subject to consent
by the agent, the principal may, in addition to
appointing the agent, also appoint a third person to
handle the entrusted affair. If such appointment
results in loss to the agent, it may seek
indemnification from the principal.
Article 409 Joint
and Several Liability of Joint Agents
Where two or more
agents jointly handle the entrusted affair, they are
jointly and severally liable to the principal.
Article 410 Right
to Terminate at Any Time
Either the
principal or the agent may terminate the agency
appointment contract at any time. Where the other
party sustains any loss due to termination of the
contract, the terminating party shall indemnify the
other party, unless such loss is due to a reason not
attributable to the terminating party.
Article 411
Discharge Due to Incapacitation
An agency
appointment contract is discharged when either the
principal or the agent is deceased or incapacitated
or enters into bankruptcy, except where the parties
have agreed otherwise, or where discharge is
inappropriate in light of the nature of the
entrusted affair.
Article 412
Agent's Obligations in Case of Principal's
Incapacitation
Where discharge of
the agency appointment contract due to the death,
incapacitation or bankruptcy of the principal will
harm the principal's interests, the agent shall
continue to handle the entrusted affair before an
heir, legal agent or liquidation team thereof takes
over the entrusted affair.
Article 413 Heir's
Obligations in Case of Agent's Incapacitation
If the agency
appointment contract is discharged as a result of
the death, incapacitation or bankruptcy of the
agent, the heir, legal agent or liquidation team
thereof shall timely notify the principal. Where
discharge of the agency contract will harm the
principal's interests, before the principal makes
any care-taking arrangement, the heir, legal agent
or liquidation team of the agent shall take the
necessary measures.
Chapter Twenty
Two Trading-Trust Contracts
Article 414
Definition of Trading-Trust Contract
A trading-trust
contract is a contract whereby the trustee-trader
conducts trading activities in its own name for the
trustor, and the trustor pays the remuneration.
Article 415
Expenses Borne by Trustee-trader
The expenses
incurred by the trustee-trader in the course of
handling the entrusted affair shall be borne by the
trustee-trader, except otherwise agreed by the
parties.
Article 416
Trustee-trader's Obligation to Exercise Due Care
Where the
trustee-trader is in possession of the trust item,
it shall keep the trust item with due care.
Article 417
Disposal of Defective Trust Item by Trustee-trader
If a trust item
was defective, perishable or susceptible to
deterioration at the time it was delivered to the
trustee-trader, upon consent by the trustor, the
trustee-trader may dispose of the item; where the
trustee-trader is unable to contact the trustor in
time, it may dispose of the trust item in a
reasonable manner.
Article 418
Pricing of Trust Item
Where the
trustee-trader is to sell the trust item below, or
buy the trust item above, the price designated by
the trustor, it shall obtain consent from the
trustor. If such sale was effected without consent
by the trustor, and the trustee-trader made up the
deficiency on its own, it is binding on the trustor.
Where the
trustee-trader sold the trust item above, or
purchased the trust item below, the price designated
by the trustor, the remuneration may be increased in
accordance with the contract. Where such matter was
not prescribed or clearly prescribed, and cannot be
determined in accordance with Article 61 hereof, the
benefit belongs to the trustor.
Where the trustor
gives special pricing instruction, the
trustee-trader may not make any sale or purchase in
contravention thereof.
Article 419
Trustee-trader Acting as Purchaser or Seller
Where the
trustee-trader is to sell or purchase a commodity
the price of which is fixed by the market, the
trustee-trader may act as the purchaser or seller
itself, unless the trustor has otherwise manifested
its intention.
Where the
trustee-trader is in a situation described in the
previous paragraph, it may still require payment of
remuneration from the trustor.
Article 420
Trustor's Obligation to Take Delivery;
Trustee-trader's Remedies in Case of Trustor's
Failure to Take Delivery
Once the
trustee-trader purchased the trust item in
accordance with the contract, the trustor shall
timely take delivery. Where after receiving demand
from the trustee-trader, the trustor refuses to take
delivery without cause, the trustee-trader may place
the trust item in escrow in accordance with Article
101 hereof.
Where the trust
item fails to be sold or the trustor withdraws it
from sale, the trustee-trader may place the trust
item in escrow in accordance with Article 101 hereof
if the trustor fails to retrieve or dispose of it
after receiving such demand from trustee-trader.
Article 421
Trustee-trader's Rights and Obligations as Party to
Contract with Third Person
Where the
trustee-trader entered into a contract with a third
person, it directly enjoys the rights and assumes
the obligations thereunder.
Where the third
person failed to perform its obligations, thereby
causing damage to the trustor, the trustee-trader
shall be liable for damages, except otherwise agreed
by the trustee-trader and the trustor.
Article 422
Trustee-trader's Right to Remuneration; Possessory
Lien in Case of Non-payment
Where the
trustee-trader has completed the entrusted matter or
has partially completed the entrusted matter, the
trustor shall pay the appropriate remuneration
thereto. Where the trustor fails to pay the
remuneration within the prescribed period, the
trustee-trader is entitled to a possessory lien on
the trust item, except otherwise agreed by the
parties.
Article 423
Provisions Governing Agency Appointment Contracts
Applicable
A matter not
provided for in this Chapter shall be governed by
the relevant provision applicable to agency
appointment contracts.
Chapter Twenty
Three: Brokerage Contracts
Article 424
Definition of Brokerage Contract
A brokerage
contract is a contract whereby the broker presents
to the client an opportunity for entering into a
contract or provides the client with intermediary
services in connection with the conclusion thereof,
and the client pays the remuneration.
Article 425
Broker's Obligation to Provide True Information
The broker shall
provide true information concerning matters relevant
to the conclusion of the proposed contract.
Where the broker
intentionally concealed any material fact or
provided false information in connection with the
conclusion of the proposed contract, thereby harming
the client's interests, it may not require payment
of any remuneration and shall be liable for damages.
Article 426 Broker
Entitled to Remuneration
Once the broker
facilitated the formation of the proposed contract,
the client shall pay the remuneration in accordance
with the brokerage contract. Where remuneration to
the broker was not prescribed or clearly prescribed,
and cannot be determined in accordance with Article
61 hereof, it shall be reasonably fixed in light of
the amount of labor expended by the broker. Where
the broker facilitated the formation of the proposed
contract by providing intermediary services in
connection therewith, the remuneration paid to the
broker shall be equally borne by parties thereto.
Where the broker
facilitated the formation of the proposed contract,
the brokerage expenses shall be borne by itself.
Article 427 Broker
Entitled to Reimbursement in Case of Failure to
Conclude Proposed Contract
Where the broker
failed to facilitate the formation of the proposed
contract, it may not require payment of
remuneration, provided that it may require the
client to reimburse the necessary brokerage expenses
incurred.
SUPPLEMENTARY
PROVISIONS
Article 428
Effectiveness; Repealing Certain Laws
This Law shall
take effect as from October 1, 1999, and the
Economic Contract Law of the People's Republic of
China, the Foreign-related Economic Contract Law of
the People's Republic of China, and the Technology
Contract Law of the People's Republic of China shall
be repealed simultaneously.
