LeRoy H. Graw EdD, DBA, C.P.M., CPCM, CPP, CPPM, CISCM,Chinas Contract Law,Knowledge/Skill/Ability,Be able to write a contract prepared under Chinas Contract Law when required.,Introduction,Contract Law of the Peoples Republic of China (PRC) was promulgated on National Day, October 1st, 1999 It replaced a host of existing laws, including: Economic Contract Law of the PRC (ECL) Law of the PRC on Economic Contracts involving Foreign Interests (FECL) Law of the PRC on Technology Contracts Contains 23 Chapter and 428 Articles,Background,The new PRC Contract Law mirrors provisions of the U.N. Convention on the International Sale of Goods (CISG), some ideas of the Uniform Commercial Code, and some modern trends in Western law. It also removes punitive provisions of prior law, provides for remedies for breach, contemplates specific performance, and frowns on penalty clauses not related to actual losses.,Definition of a Contract,Article 2 of the new Contract Law provides that a contract in this Law refers to an agreement establishing, modifying and terminating the civil rights and obligations between subjects of equal footing. A contract is an agreement between the subjects, no matter they are natural persons, legal persons or other organizations. A contract is an agreement of civil relationship being concluded and signed by and between specific civil subjects, that is, by and between two or more natural persons, by and between natural person(s) and legal person(s) or other organization(s), by and between legal persons, by and between legal person(s) and other organization(s).,Scope of the New Law,Excluded: Contracts involving personal status relationship, such as on matrimony, adoption, guardianship, etc., under the provisions of other laws. Contracts for guarantee or for insurance. Other contracts not covered in the “Specific Provisions”. All contracts must follow the “General Provisions” of the new contract law, even though there are separate laws covering these contract types.,Scope of the New Law,Included: Other than those excluded, domestic contracts and foreign contracts which involve foreign interests. 15 specifically-listed kinds of contracts found in the Specific Provisions. These include: contracts for sales contracts for supply and use of electricity, water, gas or heating contracts for donation contracts for loans contracts for lease contracts for financial lease contracts for work contracts for construction projects contracts for transportation contracts for technology contracts for storage contracts for warehousing contracts for commission contracts for brokerage contracts for intermediation.,What is Included?,Article 12 The content of a contract is determined by the parties and generally includes the following clauses: (1) designations or names and addresses of the parties; (2) the targeted matter; (3) quantity (4) quality; (5) price or remuneration; (6) time, place and mode of fulfillment; (7) liability for breach of contract; and (8) dispute settlement.,Specific Points,Oral contracts allowed. Binding contracts may be written or oral, unless limited by agreement or law. Similar to the CISG. Unlike the UCC, which limits oral contracts to $5,000.,Specific Points,Recognition of modern transaction modes. Electronically transmitted communications (telegram, telex, facsimile, electronic data interchange and e-mail) constitute writings for purposes of contract law.,Specific Points,Good faith in negotiating and performing. A party who, in the negotiating process, deliberately conceals important facts or pretends to conclude a contract may be liable for causing loss to the other party. Good faith is required in the performance of contractual rights and duties.,Specific Points,Grounds for revocation/modification. Where serious misunderstanding lies at the base of the contract, or where the contract is manifestly unfair at the time it was made, a party may seek modification or revocation.,Specific Points,Business secrets protected. A party who learns a business secret of the other in the contracting process risks damages for disclosing or unfairly using the information.,Specific Points,Adhesion and Standard Form Contracts. Akin to consumer protection measures in U.S. law, the new law invalidates clauses that purport to immunize a party from, inter alia, causing personal injury or property damage to the other.,Specific Points,Rules of Interpretation. In case of disputes, standardized contracts will be interpreted according to general understanding, and ambiguities shall be resolved in favor of the non-drafting party. Where international contracts specify, for example, that both the Chinese and English versions will have equal validity, disparate meanings shall be interpreted according to the purpose of the contract.,Specific Points,Offer and Acceptance. In contrast to prior law, fairly detailed rules now govern offer and acceptance, formation and revocation of offers. For example, an acceptance is generally ef