【正文】
    
  
  
  Road Map
  
  1. The development of civil law in China
  2. The main source of Chinese civil law
  3. General Principle of Civil Law
  4. Law of Marriage, Law of adoption and Law of inheritance
  5. IP law
  6. Contract law
  
  I. The Development of Civil Law in China
  1. before 1910: one draft law
  Many historians think of the year 1910 as the separation year of ancient China from modem China. This argument is true, at least to Chinese law. Before 1910 there was no civil law, neither law of such kind as western civil law system. In ancient China, there was only one law, criminal law, which governed all kinds of relations between people, including criminal, civil, administrative and so on.
  Note is taken that the draft law of civil code by Qing dynasty. This draft was done with the help of Japanese legal scholars based on German civil law. It almost copied all the provisions of German civil law except law of marriage and law of inheritance. It contains five books, general principles, law of obligations, property law, family law and inheritance law, with 1569 articles in total.
  2. from 1911 to 1949: two civil laws
  (1) From 1911 to 1930
  In this period, the legitimate government was Beiyang Government (北洋政府). With the support by Sun Yet-sen (孙逸仙，孙中山，or 孙文), the draft law of civil code by Qing dynasty was adopted almost without reservation by Beiyang government.
  (2) From 1930 to 1949
  In 1928 Kuomindang (国民党) became the legitimate government in China and at the same time began to draft a new civil code. The drafting work ended in 1930 and the civil law was adopted at the same year. This civil law almost was drafted according to the former civil, taking consideration of some ideas in Swiss civil code. The structure of the former civil law was maintained. This civil law is still effective in Taiwan.
  3. from 1949 to 1986: three abortive drafts
  We can call this period as no-civil-law era. Throughout this period, there was no civil law except marriage of law, the content of which will be mentioned in Chinese marriage law part. Nevertheless, China experienced three drafts of civil law, though no one was really adopted by the reason of political movements.
  The first draft was made in 1954. This draft was made based on the 1922 civil law of Soviet Union. According to the idea of Soviet Union, the relation of marriage can not be entailed in the civil law regime and this idea also influenced the structure of the current civil law. Therefore, this draft constitutes four parts, general principles, property law, law of obligations and inheritance law, with 525 articles in total.
  The second draft came out and failed again in 1962. This draft was characterized by an idea that it must be different both from Soviet civil law and from capitalism civil law. It had three parts, general principle, ownership law and transaction of property, with 262 articles. Within this draft, on the one hand a lot of legal terms were abandoned; on the other hand, inheritance law was eliminating out of civil law regime, following marriage law. That is the reason why there is no the two part in the current civil law.
  The last draft was provided in 1982. Since market economy has not yet fully established, the adoption of this draft was suspended until 1986. This draft is in fact the current civil law almost with the same provisions.
  4. from 1986 till now
  As we can see from the above mentioned, 1986 civil law is the 1982 draft law of civil law. This law was adopted in 1986, almost twenty years ago. Although this law is named as general principle of the civil law, it plays a role of civil code for the past two decades. Not like the structure of German or French civil code, Family Law and Inheritance Law are separated from General Principles of the Civil law based on the reason I mentioned before.
  Nevertheless, there are only 156 articles in GPCL, which means its provisions are far from applicable. In fact, as we can see from its name, GPCL only provides very general principles concerning its every part. Two underlying reasons can be taken account:
  (1) From political perspective, in 1986 China was facing its transitional period. Although open-door policy and market economy had been established for several years, the legislator was still not sure where Chinese socialism reform should go. Since market economy is the base of civil law, a perfect civil code cannot come out without the resolution of market economy;
  (2) There was also a practical problem, which is lack of legal experts. Since 1949 until 1978, there was no law in China except for Constitution Law and Law of Marriage. Legal education and legal profession was destroyed from almost 30 years. It is impossible to draft a specific civil code without the help of legal experts.
  Therefore, at that time GPCL was adopted as a transitional law. Nevertheless, unfortunately no one would imagine that twenty years later it is still in effect, though some articles are useless any more.
  5. The New Draft of Chinese Civil Code
  1. Underlying Reasons for Drafting the New Civil Code
  (1) The provisions of GPCL are too simple for application.
  (2) There have already been several specific laws outside GPCL, some provisions of which are contradictive. For instance, the Civil Juristic Acts in GPCL vs. the Validity of contracts in CL.
  (3) Some articles in GPCL are not compatible with the current situations. For example, the new draft wants to decrease to the age, from 10 to 7, to be a person with limited capacity. In addition, the general statute of limitation will be extended to three years.
  (4) More than 20-year experience of market economy calls on a systematic and integrated civil law.
  2. The Tentative Structure of the new Draft Civil Code
  According to the resolution of People’s Congress, the new draft will finally contain 9 books covering every aspects of civil law system. The 9 books are in turn:
  Book I: General Principles
  Book II: Property Law
  Book III: Contract Law
  Book IV: Law of Personal Rights
  Book V: Law of Marriage
  Book VI: Law of Adoption
  Book VII: Law of Inheritance
  Book VIII: Tort Law
  Book IX: Conflict Law
  Since China has already published Contract law, Law of Marriage, Law of Adoption and Law of Inheritance in the past years, the new draft of civil code will not revise the four legislations too much. Nevertheless, the gravity of the draft is the other five books. The final draft would include more 1,200 articles.
  People’s Congress also thought that it is difficult, if not impossible, to enact a complete civil code in one time and therefore the draft law of civil code will be discussed and approved by NPC one book after another.
  The debates on the draft of civil code are cantered on its structure. Two hottest issues are: one is whether law of personal rights can be an independent book or not; the other is whether the draft should be include law of Intellectual Property Rights.
  The current draft work of NPC is focused on the draft of Property Law. The draft of property law began from 1998. It has been submitted and discussed by the NPC for four times, but none got a chance of approval. According to the latest news, the draft will not be submitted for discussion in the upcoming NPC annual session. However, it does not mean the draft will be set aside and it will however be subject to further revision. And the revised draft will be scrutinized in the end of 2006 to determine whether it is appropriate to be submitted for discussion in the next NPC annual session.
  
  II. Main source of Chinese civil law
  It is difficult to confine the scope of civil law in China. To a narrow sense, it only contains the law of persons, property law, contract law and tort law. Family law and inheritance law are not parts of civil law. But now, it is a common recognition that family and inheritance law are part of civil and will be included in the new draft the civil law. With regard to IP law, there are still more disputes. Even now, no one is sure whether it will be contained in the new draft of civil law or not. In this lecture, I will give the three laws a brief introduction in the following.
  1. General Principles of the Civil Law (GPCL) 民法通则
  Adopted in 1986
  2. Contract Law (CL) 合同法
  Adopted in 1999
  3. Law of Marriage, Law of Adoption and Law of Inheritance 婚姻法，收养法，继承法
  Law of marriage was adopted in 2001.
  Law of adoption was adopted in 1991.
  Law of inheritance was adopted in 1985.
  4. Intellectual Property Law (Copyright Law, Patent Law and Trade-mark Law)知识产权法 （著作权法，专利法，商标法）
  Copyright law and trade-mark was adopted in 2001 and patent law was adopted in 2000 in order to join WTO.
  5. Judicial Interpretation of Chinese Supreme Court 司法解释
  When looking at Chinese legal system, note should be take of interpretation of Supreme Court. Although China has no case law framework, Supreme Court is conferred the power to issue interpretation, which has the same effect of statutory law. Almost every law has its own interpretation by the Supreme Court. As a lawyer you should always keep in mind of this interpretation. However, in most cases the judicial interpretations goes too far, sometimes even depart from the scope of the statutory law. It sounds kind of unconstitutional; nevertheless the legislative situation in China pushes the Court to do so because the statutory laws are either too general or too outdated to be implemented.
  
  III. GPCL
  Chapter 1: Basic Principles
  This chapter provides several principles of civil law, such as equality, fairness, etc. the most important function of these principles are that according judicial practices they can be applicable law when there is no specific rules governing the dispute related.
  Chapter 2: Natural Persons 自然人
  This chapter defines natural persons with full capacity, with limited capacity and without capacity according to age or mental status. It also prescribes the procedure to declare missing person or death.
  Note is taken that persons whose age are or over 18 have full capacity; persons whose age is less than 10 have no capacity; between are persons with limited capacity. (Art. 11, 12 GPCL)
  Chapter 3: Legal Persons 法人
  Legal persons include corporation, join venture, governmental offices and social organisation.
  (1) Corporation
  As regards the types of corporation in China, note is taken that in last five years, corporation law has been changed for three times. The latest version of corporation was published in last year, 2005. Three types of corporations are established by the new corporation law, which are public limited liability company, private limited liability company, one-person company and state-owned company.
   The difference between public limited company and private limited company is that public limited company can be a listed company in stock market whereas private limited company cannot.
   One-person company is a new type of company supplemented by 2005 corporation law. One-person company refers to a company with only one shareholder, whether a natural person or a legal person, however a natural person can only establish one one-person company.
   State-owned company is a company whose shareholder is the state.
  (2) Joint venture
  Join ventures are another type of legal person. The law of join venture was published in 1997. The difference between join venture and corporation is that join venture bears joint and unlimited liability, whereas corporation limited liability.
  (3) Governmental offices
  The civil act of government is governed by the Governmental Procurement Law 2002. This law prescribes the ways by which the government can take civil acts. Generally speaking, the civil act of government must obey the rules of civil law, especially contract law.
  Chapter 4: Civil Juristic Acts and Agency 民事法律行为，代理
  After entering into effect of the related provisions in Contract law, the application of this chapter is increasingly limited. The reason is that the related provisions in contract law changed the provisions of GPCL. I will briefly mention it in the introduction of Chinese contract law.
  Chapter 5: Civil Rights
  Section 1: Property Rights 物权
  Property rights are governed by Only 13 articles which are still effective. Those articles just repeat the related context in Constitution Law.
  Section 2 Creditors' Rights 债权
  Publication of contract law makes this section no longer in force.
  Section 3 Intellectual Property Rights 知识产权
  Presently China already has copyright law, patent law and trademark law. So this section is out of date at all.
  Section 4 Personal Rights 人身权
  8 articles constitute Chinese personal law. Without doubt these articles are too general to be applied. Since 2003, Supreme Court published a judicial interpretation concerning personal rights. Unfortunately, it is also unspecific.
  Chapter 6: Civil Liability (Liability of Breach of Contracts and Liability of Tort) 民事责任（违约责任，侵权责任）
  The provisions of liability of breach of contracts have been substituted by Contract Law.
  The provisions of liability of tort are still effective. Tort means a wrongful act, other than a breach of contract, which leads to damage without legal justifications. Nevertheless, like the provisions of property law and personal law, tort law is another concern of the draft of civil code.
  Chapter 7: Limitation of Action 诉讼时效
  This chapter prescribes limitation of action, which means that if not taking action in certain period your rights will not get legal protection.
  The period concerned is two years beginning at the time the entitled person knows or should know that his rights have been infringed (Art. 137 GPCL). Under certain conditions, this period can be extended (see, Art. 139 GPCL).
  Chapter 8: Application of Law in Civil Relations with Foreigners （Conflict Law 冲突法）
  (1) If the international treaty provides otherwise, the international treaty applies. (Art. 142 GPCL)
  (2) The ownership of real estate shall be bound by the law of the place where it is situated. (Art. 144 GPCL)
  (3) If the parties have not made a choice of the law applicable to settlement of their contractual disputes, the applicable law is the law most closely connected to the contract concerned. (Art. 145 GPCL)
  (4) Tort is governed by the rules of the country where the tort takes place. If both parties have the same nationality, the tort is governed by the law of their own country. (Art. 146 GPCL)
  (5) Marriage is be bound by the law of the place where they get married, while a divorce shall be bound by the law of the place where a court accepts the case. (Art. 147 GPCL)
  (6) Maintenance of a spouse after divorce shall be bound by the law of the country to which the spouse is most closely connected. (Art. 148 GPCL)
  (7) In the statutory succession of an estate, movable property shall be bound by the law of the decedent’s last place of residence, and immovable property shall be bound by the law of the place where the property is situated. (Art. 149 GPCL)
  
  
  IV. Law of Marriage, Law of Adoption and Law of Inheritance
  1. Law of Marriage
  The new Chinese marriage law was adopted in 2001. I will just mention the new changes in the law of marriage in the following.
  (1) Finally we can marry freely now.
  In the old marriage law, there was one extra condition for marriage, which was the approval of the leaders of the institution, organisation, corporation and etc where both you and your spouse work. Without a written document of approval by your leader you cannot marry. Now this limit has been abandoned at all.
  (2) The procedure of divorce is less complicated.
  Under the old marriage law regime, divorce is the most burdensome procedure. Whether the two parties agree to divorce or not, they must go into the procedure of mediate, which is not an authority and is normally constituted by the juniors working with you or living with you. They will try to persuade you two not to divorce. This process can last for more than one year, or years. And this procedure is compulsive. Some moralist said that it is probably the most important reason for low divorce rate before the new marriage law. Within the new marriage law, this procedure became optional.
  (3) Husband and wife can conclude a contract to determine the allocation of their own property before or after marriage.
  The old marriage law prescribed that all the property, whether husband’s or wife’s, before marriage or after marriage must be evenly and collectively owned by the two parties. It means 50% for each one, no more no less. Now the two parties can decide by consent how to allocate their property, whether obtained before marriage or after marriage. If there is no such contract, 50% for everyone.
  (4) Compensation for non-fault party in case of divorce
  The new marriage law provides that in case of divorce the non-fault party can claim for damage from the fault party. The damage can be claimed only in the following situations:
  (1) bigamy, i.e. marrying one person while still legally married to another;
  (2) living together with someone else other that your own spouse;
  (3) family violence;
  (4) abuse or abandon family members.
  This is a new article.
  (5) A special provision in Chinese marriage law
  In case one married party is an active soldier, his consent of divorce is a necessary condition for divorce. Without his consent, even the court cannot announce the divorce. However, if both husband and wife are active soldiers, this article does not apply to them.
  2. Law of Inheritance
  The inheritance law was adopted in 1985, one before the adoption of GPCL. There is no problems concerning this law and I think its whole provisions will be codified in the new draft of civil law and therefore will continue to be effective.
  The decreased person can conclude a contract to distribute his property before his death. There is no big difference herein from other countries. The difference of inheritance law among all countries exists in statutory inheritance. I will introduce the provisions for statutory inheritance in the following.
  In case of no inheritance agreement, the property of the decreased will be distributed as followed:
  (1) The first-level heirs, which exclude the inheritance of all other heirs:
  Surviving spouse, parents and children (including illegitimate children)
  (2) The second-level heirs, who hold the right of inheritance only when there is no first level heir:
  Brothers and sisters, grandfather/mother, grandfather/mother in law
  All the heirs at the same level has equal right of inheritance, which means the property of the decreased will be evenly distributed in the heirs at the same level.
  3. Law of Adoption
  I assume that there is no big difference of Chinese adoption law from other states. So I will only introduce some special provisions.
  (1) The minors who can be adopted must be less than 14 years old
  (2) The adopting person must have no child and be more than 30 years old.
  (3) In case a male person without spouse adopts a young girl, the adopting person must be 45 years older than the adopted person.
  (4) Once adopted, the adopted child has the same right prescribed by the related law as the born child of the adopted person.
  
  V. IP law
  It contains three parts, i.e. copyright law, patent law and trademark law. The new laws were adopted after joining WTO.
  1. Legal Provisions
  (1) Copyright law
  Copyright law is to grant an author, a composer, a playwright, a publisher, or a distributor with the right of exclusive publication, production, sale, or distribution of a literary, musical, dramatic, or artistic work. Chinese copyright law mainly prescribes the scope of copyright, the right to use, the limits of right to use.
  The duration of copyright is 50 years. In case the owner is a natural person, the copyright ends on 31 December of the fiftieth year since death of the owner. In case of a legal person, the copyright end on 31 December of the fiftieth year since the first publication of the production concerned.
  (2) Patent law
  Patent law confers upon the creator of an invention the sole right to make, use, and sell that invention for a set period of time. There are three types of patent within Chinese patent law, i.e. invention, utility model and design. As regard the difference between invention and utility model, you can say that utility model is a ‘little invention’, the significance of which is far less than invention.
  The duration of invention patent right for inventions shall be twenty years, the duration of patent right for utility models and patent right for designs shall be ten years, counted from the date of filing.
  (3) Trademark law
  Trademark is a name, symbol, or other device identifying a product, officially registered and legally restricted to the use of the owner or manufacturer. The trademark law prescribes the procedure to register trademark, the right to use trademark and how to protect your trademark.
  The period of validity of a registered trademark shall be ten years, counted from the date of approval of the registration. Nevertheless, by an application of renewal of the registration, you can continue use your trademark. Every renewal will be effective for ten years.
  As regard the protection of digital software, there is a special regulation made by state department, which provides the right to use digital software.
  2. Execution of IP Law in China
  In a word, Chinese IP law is good. The problems come out in the process of execution. Probably everyone knows the lawsuit between USA and China, mainly concerning the illegal use of digital software, which indicates the insufficient protection of IP of China in practice. The IP law cases in China mainly concern goods with illegal trademark, illegal DVD, digital software and other publications. The protection of patent works better than the protection of the other two.
  In order to keep the promises in joining WTO, China began to beat the act of infringing IP to a greater extent. It can be implied in the two aspects:
  (1) Since 1999 a special chamber dealing with IP law cases has been established in Supreme Court, every high court, some intermediate court and three local courts (under normal conditions the court of first instance for IP cases is intermediate court. Therefore, only one local court in Beijing and two local courts in Shanghai have this special chamber);
  (2) The government allocates more resources to judicial authorities, including courts and some government offices, to deal with IP law cases.
  
  The number of IP cases dealt with by different authorities in 2005
  
  Trademark cases
  Copyright cases
  (including digital software)
  Patent cases
  State Administration for Industry & Commerce 24189
  State Administration for Publications 2960, including 1.69 Billion pieces of illegal publications
  State IP Office 1269
  Courts 8332 in total, increasing by 21.5%
  
  However, this is far from enough. For instance, you easily find illegal DVD, software, clothing and so on in each city in China. According to the resolution of State Department this year, the fight against infringement of IP will be one of the most important missions this year and the situation will be expected to be changed before 2008 Olympic Games.
  
  IV Contract Law
  1. Freedom of Contract 合同自由
  Three aspects
   Freedom to make a contract (Art. 4 Contract Law)
   Freedom to choose the other parties of a contract (Art. 3 & 4 Contract Law)
   Freedom to decide the content of a contact (Art. 5 Contract Law)
  2. Formation of a Contract (offer and acceptance) 合同成立（要约，承诺）
  A. General terms of a contract
  A contract is an agreement for the purpose of establishing, changing or terminating rights or obligations. (Art. 2 CL) A contract generally contains the following items, which shall be specific and certain.
  a. prerequisite items:
  Lack of these items a contract cannot be concluded. There is no common recognition about prerequisite items of a contract in general.
  i. Contract parties;
  ii. Subject matter;
  iii. Quantity;
  Case 1
  A and B concluded a contract that A rents one of his buildings to B. Do you think of the terms concerning subject matter, one of A’s buildings as unspecific and therefore void? The answer is no. It is a valid contract since we already know the subject matter. As regards the question of which building is subject to the contract, it depends on contract interpretation.
  
  b. non-important items:
  Lack of the following items, a contract may be validly concluded but need further specification.
  iv. Quality;
  v. Price;
  vi. The place of performance;
  vii. The time of performance;
  viii. The method of performance;
  ix. Allocation of the expense of performance;
  x. Liability of breach of a contract;
  xi. Method of dispute resolution.
  Therefore, when reviewing a draft of contract, the breakthrough for a lawyer is to look at the 11 points to examine in general if there are already the related terms and if these terms are sufficient specific and certain according to actual intention of contract parties. If unfortunately an incomplete contract has been concluded and valid, the next step is to ask for a supplement agreement with the other parties. If it does not work, then try to specify the uncertain terms according to the relevant provisions of contract interpretation in contract law or common usage. (Art. 62 CL)
  (Art. 62 CL)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:
   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;
   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 wasconcluded, and if adoption of a price mandated by the government or based on government issued pricing guidelines is required by law, such requirement applies;
   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;
   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;
   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;
   If the party responsible for the expenses of performance was not clearly prescribed, the obligor shall bear the expenses.
  B. Offer
  Like all other legal systems Chinese Contract Law requires an offer and an acceptance for a contract validly to be concluded.
  a. Definition
  An offer is a party’s expression of his intention to enter into a contract with the other party. (Art. 14 Contract Law) An offer shall include all the elements of a valid contract except for the acceptance of the other party, i.e., if the other party want to conclude the contract, what he does is to declare acceptance after receiving the offer.
  Therefore, another concept, invitation to offer (Art. 15 Contract Law), shall differentiate from offer. An invitation to offer is an intention to invite the other party to make an offer.
  b. Legal Conditions (Art. 14 Contract Law)
   Its terms are specific and definite.
  It means an offer shall include fundamental elements of a contract. There is no common recognition about prerequisite items of a contract in general. According to Chapter Nine: Sales Contracts within Contract Law, a sales offer shall contain subject matter, quantity.
  Case 2
  Company A sends an offer to Company B that I need steel of Type X, and if you have reserves, please reply ASAP and I will buy. IS IT AN OFFER? Answer: no, because no terms about quantity.
  
   It indicates that upon acceptance by the offeree, the offeror will be bound thereby.
  Case 3
  Company A sent Company B a fax with the content that I have 100 ton steel of Type 100, the price of which is 100,000 RMB. If you want to buy, just reply. In this case, it is not an offer but an invitation to offer because Company A does not mention he will be bounded by the fax, i.e., when B accepts, he will definitely sell his product to B.
  Other specific types of invitation to offer include catalogues (price list), announcement of auction, call for tender and commercial advertisement. (Art. 15 CL)
  c. Validity of an offer (Art. 16 CL)
  An offer becomes effective when it reaches the offeree. Note shall be taken of ‘reach’. In case of mail, an offer is effective at the time you send the mail, not when the offeree receives the mail. (Art. 24 CL) It is very important to decide whether the offeree make a valid acceptance within time limit.
  Case 4
  A sends B an offer by mail on 1 May, 2006 that … please reply within 10 days. B receives this offer on 8 May, 2006. (1) When the offer becomes effective? Answer is 1 May, 2006. (2)What is the final date for B to make an acceptance? Answer is 11 May, 2006.
  
  d. Withdraw an offer (Art. 17 CL)
  The notice of withdrawal shall reach the offeree before or at the same time as the offer. You should take care that the word of “reach”here does not have the same meaning as that for the validity of an offer. “Reach”means reach in fact. It is a higher requirement.
  C. Acceptance
  a. Definition
  An acceptance is the offeree’s expression of his intention to accept an offer.
  b. Validity of an acceptance
   The acceptance shall be express or implied in fact. Mere silence does not constitute an acceptance. (Art. 22 CL)
   The acceptance shall be made within the time limit indicated in the offer (Art. 23 CL)
   An acceptance cannot change anything of the offer. (Art. 30 CL) Otherwise; it is not an acceptance, but a counter-offer, or a new offer.
   An acceptance becomes valid when it reach the offeror (Art 23 CL)
  c. Withdrawal of Acceptance (Art. 27 CL)
  An acceptance may be withdrawn. The notice of withdrawal shall reach the offeror before or at the same time as the acceptance.
  D. The Formation of Contract
   A contract is formed once the acceptance becomes effective (Art. 25 CL)
   In case the parties agree or the relevant laws prescribe that entering into of the contract in question shall be in writing or in other forms, the contract is formed when the relevant form is accomplished. (Art. 32, 33, 36 CL)
  Case 5
  Company A and Company achieves an agreement of sales of wheat from A to B by fax and they agree to conclude the contract by a memorandum. Before concluding the memorandum, A transports its wheat to B and B declines to accept. Which option is right?
  A. the agreement is void
  B. the agreement is not formed
  C. the validity of the agreement is uncertain
  D. none
  
  
  E. Pre-contract Liabilities (Article 42 CL)
  Where in the course of concluding a contract, a party engaged in any of the following conducts, thereby causing loss to the other party, he shall be liable for damages.
   Negotiating in bad faith under the pretext of concluding a contract;
   Intentionally concealing a material fact relating to the conclusion of the contract or supplying false information;
   Any other conduct which violates the principle of good faith.
  
  Case 6
  On 5 June Company A faxed Company B to buy a machine from B and required ‘reply at once’. On the same day Company B replied that ‘has received your fax’. On 10 June Company A called B if it wants to accept or not. B replied to accept, but ask to conclude a memorandum on 15 June. On 15 June A went to B’s office, nevertheless, B asked for a higher price. A declined B’s offer and B declined to conclude the contract. Which option is right? (selected from Chinese Bar Examination 2005)
  A. the sales contract was formed on 5 June
  B. the sales contract was formed on 10 June
  C. the sales contract was formed on 15 June
  D. A is entitled to ask B to bear its Pre-contract liability.
  3. Validity of Contract
  Although in most cases the validity of a contract mainly depends on the consent of the parties, every jurisdiction does not allow some consent to be legal contracts in consideration of public order. The validity of contract runs as a filter, to filter out illegal consent in order to maintain public order.
  A. Contracts the Validity of which is Uncertain 效力待定合同
  a. Definition
  It refers to a contract that is concluded by a person without sufficient capacity and the validity of the contract concerned need ratification from another person who has sufficient capacity.
  b. Two situations
   A contract concluded by a person with limited capacity (age: over 10 and less that 18). Its validity depends on the confirmation of his guardian. (Art. 47 CL)
   A contract concluded on the principle’s belief by a by a person who lacked agency authority, who acted beyond his agency authority or whose agency authority was extinguished. Its validity depends on the confirmation of his principle. (Art. 48 CL)
   A piece of property is sold by a person without property rights over it. its validity depends on the confirmation of the owner. (Art. 51 CL)
  Case 7
  A Borrowed its computer to B, however, B sold it to C. According to the related provisions of Contract Law, which argument about the validity of the sales contract between B and C is right? (Selected from Chinese Bar Examination 2002)
  A. Void
  B. Valid
  C. Validity is uncertain
  D. Can be Amended or Cancelled
  Comment on Art. 51 CL: it is one of the most debatable articles in Chinese Contract Law. Within Chinese Civil law system, there exists a differentiation between contract rights and property rights. The two kinds of rights are subject to different rules of law. Putting it clear, a person who does not own Property A can conclude a contract with the other person with the content to sell Property A. Academically speaking; this contract therefore is valid regardless of actual performance. If he cannot deliver Property A to the other person, he just breaches the contract and therefore bears liability related. This contradiction will be changed in the new draft of civil code.
  c. Protection for the other parties
  The other party may demand that the person with capacity confirm the contract within one month. Where the person with capacity fails to reply, he is deemed to have declined to confirm the contract. The other party is entitled to cancel the contract.
  B. Void Contracts: 无效合同
  a. Definition
  By the reason of contradict with public order, those contracts are regarded as never coming into existence. They can not become valid in any situation and bind nobody.
  b. Six situations
   A contract concluded by a person without capacity (age: less that 10)for civil act (Art. 58.1 GPCL)
   One party induced conclusion of the contract through fraud or duress, thereby harming the interests of the state; (Art. 52.1 CL)
   The parties colluded in bad faith, thereby harming the interests of the state, the collective or any third party; (Art. 52.2 CL)
   The parties intended to conceal an illegal purpose under the guise of a legitimate transaction; (Art. 52.3 CL)
   The contract harms public interests; (Art. 52.4 CL)
   The contract violates a mandatory provision of any law or administrative regulation. (Art. 52.5 CL)
  
  D. Contracts Subject to Amendment or Cancellation: 可变更可撤销合同
  a. Definition
  After formation of these contracts, parties in the contracts are entitled to amend or cancel the contracts concerned. Once cancelled, these contracts are regarded as void contracts.
  The underlying reason of contracts subject to amendment or cancellation is that these contracts are concluded against freedom of contract; nevertheless, concluding a contract against freedom of contract is kind of tolerable by the society, compared with concluding a contract against public order. Therefore, these contracts are not automatically void and their validity depends on the other parties’ action.
  Compared with contract the validity of which is uncertain, in terms of Art. 58 CL the aggravated party can claim for damage against the other party under contracts subject to amendment or cancellation, whereas the aggravated party under contracts the validity of which is uncertain can only claim for pre-contract liability according to Art. 42 CL.
  b. Three situations
   The contract was concluded due to a material mistake (Art. 54.1 CL) 重大误解
  A material mistake refers to a situation where a person acts contrary to his intention based on incorrect knowledge, and therefore suffers substantive loss.(Art. 71, the Opinion)
  Case 8
  A is a professor. At the beginning of his lecture, he said that the students who want to buy his new book can sign their name on a paper he provided. B came to class late so that he did not catch what A said. When seeing other students sign their name on a paper, he thought it is the paper to register the presence. Then he signed his name on that paper. What is the effect of B’ signature? (Selected from Chinese Bar Examination 2005)
  A. it implies that B has the intention to buy;
  B. it constitutes a material mistake and according it the contract may be cancelled;
  C. A’ act is an offer and B’s signature is an acceptance. A contract has been concluded;
  D. B’s signature does not mean anything.
  
   The contract was grossly unconscionable at the time of its conclusion(Art. 54.2 CL) 显示公平
  The contract was grossly unconscionable when one party takes advantages of other parties’ inexperience to the extent contrary to the principle of fairness and equivalence. (Art. 72, the Opinion)
  Case 9
  A has a painting produced by a famous painter. However, he does not know the fact. He sells the painting as an ordinary painting to B. later A knows that the market price of the painting great higher than the sales to B. He has the right to cancel or amend the contract based on this article.
  
   A contract was concluded against one parties true intention by fraud or duress, or by taking advantage of the other party’s hardship (Art. 54.3 CL) 欺诈，胁迫，趁人之危
  Fraud refers to a situation one party is intended to tell the other parties’ false information, or is intended to conceal true information, in order to make the other parties to draw wrong conclusion. (Art. 67, the Opinion)
  It is duress that one party acts contrary to his real intention based on threat of his heath, reputation and property. (Art. 68, the Opinion)
  Taking advantage of the other parties’ hardship means in order to seek unfair benefit, taking advantage of the other parties’ hardship one party compel the other to manifest contrary to real intention and makes the other parties suffer seriously. (Art. 69, the Opinion)
  c. how to amendment or cancel (Art. 54 CL)
  Under the former two cases, all parties in the contract have the right to amend or cancel the contract concerned before courts or arbitrative tribunals. Under the third case, only the aggravated partied has such right.
  d. Extinguishment of Cancellation Right (Art. 55 CL)
   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;
  Note that the period of one year cannot be extended in any case.
  4. Performance of Contracts 合同履行
  A. Full Performance (Art. 60 CL)
  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.
  C. Demurrer in the Process of Performance 抗辩权
  a. Demurrer in case of Simultaneous Performance 同时履行抗辩权
  Demurrer is the right to reject. In case of simultaneous performance, either party has right not to perform if the other party fails to perform, or not fully performs. (Art. 66 CL)
  b. Demurrer in case of Consecutive Performance 先履行抗辩权
  In case that the contract obligations of the parties should be performed in order, i.e. one party should perform earlier than the other party, the party who performs later can reject its performance if the other party fails to perform, or not fully performs, in the first place.
  c. Right to Suspend Performance (Art. 68 CL) 不安抗辩权
  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:
   Its business has seriously deteriorated;
   It has engaged in transfer of assets or withdrawal of funds for the purpose of evading debts;
   It has lost its business creditworthiness;
  d. Subrogation (Art. 73 CL) 代位权
  Subrogation means to substitute one person for another. In contract law regime, it refers to a situation where the debtor delays to exercise his creditor’s right against a third person that was due, thereby harming the obligee, the obligee may ask the court for subrogation.
  Note that in a suit based on subrogation, the defendant is the third part, and not the debtor. And it is imperative for the debtor to intervene regardless of his own intention to do so.
  e. Obligee’s Right to Cancel Manifestly Unreasonable Act by Obligor 撤销权
  i. Definition (Art. 74 CL)
  Where the debtor
  (1) waived its creditor’s right against a third person that was due, or
  (2) assigned its property without reward, or
  (3) assigned its property at a low price which is manifestly unreasonable,
  Thereby harming the obligee, the obligee may ask the court to cancel the debtor’s act.
  ii. Time Limit B (Art. 75 CL)
  The creditor’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.
  Subrogation and cancellation are kind of the same case. As regards subrogation, the debtor is passive to decrease its belongings to avoid its performance, whereas in case of cancellation the debtor is active to decrease its belongings to avoid its performance.
  Case 10
  A owed B 10,000. In April 2003, after knowing B was planning to sue, A sold his property which values at 30,000 to C at the price of 100. B knew the transaction in May 2003 and he brought an action before the court in June 2004. Which claim in the following may be supported by the court? (Selected from Chinese Bar Examination 2005)
  A. the transaction between A and C is void.
  B. the transaction between A and C should be cancelled
  C. Subrogate A to ask for C’s performance
  D. C infringed A’s property rights
  
  5. Extinction and Termination of a Contract
  The rights and obligations under a contract are discharged in any of the following circumstances: (Art. 91 CL)
  A. The obligations were performed in accordance with the contract;
  B. The contract was terminated; 解除
  a. termination by consent (Art. 93 CL)
  b. under the following conditions, the parities may terminate a contract. (Art. 94 CL)
   force majeure frustrated the purpose of the contract;
  Force majeure means conditions beyond control, such as earthquake, strike, etc. Herein no liability of breach of the contract.
   Before the time of performance, the other party expressly stated or indicated by its conduct that it will not perform its main obligations;
   The other party delayed performance of its main obligations, and failed to perform within a reasonable time after receiving demand for performance;
   The other party delayed performance or otherwise breached the contract, thereby frustrating the purpose of the contract;
  C. The obligations were set off against each other; (Art. 99, 100 CL) 抵销
  D. the obligor placed the subject matter in escrow in accordance with the law, under the following conditions. (Art. 101 CL) 提存
  Escrow means to be taken by the third party.
   The obligee refuses to take delivery of the subject matter without cause;
   The obl, igee cannot be located;
   The obligee is deceased or incapacitated, and his heir or guardian is not determined;
  E. The obligee released the obligor from performance; 免除
  F. Both the obligee’s rights and obligor’s obligations were assumed by one party;
  
  6. Liabilities for Breach of Contracts (Remedies) 违约责任
  A. Two Remedies
  Basically there are two remedies in Chinese contract law: one of specific performance and the other is damage.
  a. Specific Performance
  It means to continue performance of obligations.
  b. Damage (Art. 113 CL)
  Where a party failed to perform or not fully perform according to the contract, thereby causing loss to the other party, the breaching party should compensate the actual loss of the other party.
  B. Special rules about damage 继续履行
  a. Liquidated Damage Clause (Art. 114 CL) 违约金
  The parties may prescribe that if one party breaches the contract, it will pay a certain sum of liquidated damages to the other party for the loss resulting from a party’s breach.
  If the liquidated damage indicated in the contract is too high or too low compared with the actual damage, a party is entitled to ask courts or arbitrative tribunals to reduce or increase the amount as appropriate.
  b. Deposit (Art. 115 CL) 定金
  The parties may prescribe that a party will give a deposit to the other party as assurance for the obligee’s right to performance. 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.
  The amount of deposit cannot over 20% the amount of the value of the contract.
  c. Choice between Deposit and Liquidated Damages Clauses (Art. 116 CL)
  If the parties prescribed payment of both liquidated damages and a deposit, in case of breach by a party, the other party may choose in alternative, not both, to apply the liquidated damages clause or the deposit clause.
  Case 11
  A and B concluded a agreement that A will deliver 2,000 kg apple to B at the price of 4,000, and B gives A 400 as deposit. At the same time, the liquidated damage is fixed at 600. Later A cannot perform his obligation. Which claim in the following can both protect B’interest most, and be supported by the court? (selected from Chinese Bar Examination 2000)
  A. Ask A to return twice the amount of deposit, say 800;
  B, Ask A to return twice the amount of deposit, and at the same time pay liquidated damage, 1400 in total;
  C. Ask A pay liquidated damage, at the same time return the deposit, 1000 in total;
  D. Ask A pay liquidated damage, say 600.
  
  7. Specific Contracts
  
  A. Sales Contracts (Art. 130 – Art. 175 CL) 买卖合同
  B. Contracts for Supply of Power, Water, Gas, Or Heat (Art. 176 – Art. 184 CL)
  C. Gift Contracts (Art. 185 – Art. 195 CL) 赠与合同
  D. Contract for Loan of Money (Art. 196 – Art. 211 CL) 借款合同
  E. Leasing Contract (Art. 212 – Art. 236 CL) 租赁合同
  F. Financial Leasing Contract (Art. 237 – Art. 250 CL) 融资租赁合同
  G. Contracts for Hired Work (Art. 251 – Art. 268 CL) 承揽合同
  H. Contracts for Construction Projects (Art. 269 – Art. 287 CL) 建筑工程合同
  I. Carriage Contracts (Art. 288 – Art. 321 CL) 运输合同
  J. Technology Contracts (Art. 322 – Art. 364 CL) 技术合同
  K. Safekeeping Contracts (Art. 365 – Art. 380 CL) 保管合同
  L. Warehousing Contracts (Art. 381 – 395 CL) 仓储合同
  M. Agency Appointment Contracts (Art. 396 – Art. 413 CL) 委托合同
  N. Trading-trust Contracts (Art. 414 – Art. 423 CL) 行纪合同
  O. Brokerage Contracts (Art. 424 – Art. 427 CL) 居间合同