上海交通大学：《Chinese Contract Law》课程教学资源_Reading Materials_The Code of Contract Law of the People's Republic of China and the Vienna Sales Convention

American University International Law Review Volume 15|Issue 1 Article3 1999 The Code of Contract Law of the People's Republic of China and the Vienna Sales Convention John S.Mo Follow this and additional works at:http://digitalcommons.wcl.american.edu/auilr Part of the International Law Commons Recommended Citation Mo,John S."The Code of Contract Law of the People's Republic of China and the Vienna Sales Convention."American University International Law Review 15,no.1(1999):209-170. This Article is brought to you for free and open access by the Washington College of Law Journals Law Reviews at Digital Commons@American University Washington College of Law.It has been accepted for indusion in American University International Law Review by an authorized administrator of Digital Commons American University Washington College of Law.For more information,please contact fbrown@wclamerican.edu

American University International Law Review Volume 15 | Issue 1 Article 3 1999 The Code of Contract Law of the People's Republic of China and the Vienna Sales Convention John S. Mo Follow this and additional works at: http://digitalcommons.wcl.american.edu/auilr Part of the International Law Commons This Article is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ American University Washington College of Law. It has been accepted for inclusion in American University International Law Review by an authorized administrator of Digital Commons @ American University Washington College of Law. For more information, please contact fbrown@wcl.american.edu. Recommended Citation Mo, John S. "The Code of Contract Law of the People's Republic of China and the Vienna Sales Convention." American University International Law Review 15, no. 1 (1999): 209-170

THE CODE OF CONTRACT LAW OF THE PEOPLE'S REPUBLIC OF CHINA AND THE VIENNA SALES CONVENTION DR.JOHN S.Mo" NTRODUCTION… 210 I.CODIFICATION OF CONTRACT LAW AND THE ISSUE OF UNIFORMITY..........................................211 A.LEGAL TRADITION AND THE CODE OF CONTRACT LAW ....211 B.UNIFORMITY UNDER THE CODE OF CONTRACT LAW?....... 215 II.THE RELATIONSHIP BETWEEN THE VIENNA SALES CONVENTION AND THE CODE OF CONTRACT LAW .217 III.THE MAKING OF A CONTRACT OF SALE UNDER THE CODE OF CONTRACT LAW......................... 219 A.OVERVIEW.................219 B.CAPACITY TO CONTRACT.................................. 220 C.NEGOTIATION OF CONTRACTS.................... 225 D.VALIDITYOF CONTRACT....................... 230 IV.THE PERFORMANCE OF A CONTRACT UNDER THE CODE OF CONTRACT LAW..................... 231 A.OVERVIEW.................................................231 B.THETRANSFEROF PROPERTY...........................232 C. THE TRANSFER OF RISK................................... 233 D.THE CONFORMITY OF GOODs..............................235 E.DELIVERY.......................................238 F.PAYMENT OF PRICE.................. 239 V.REMEDIES FOR BREACH OF CONTRACT UNDER THE CODE OF CONTRACT LAW.........................241 A.GENERALOVERVIEW......................................241 LL.B.,Jilin University;LL.B.,Monash University:LL.M.,Dalhousie Uni- versity;PhD,Sydney University;Associate Professor,Law School,City Univer- sity of Hong Kong;Adjunct Professor,Jilin University Law School. 209

THE CODE OF CONTRACT LAW OF THE PEOPLE'S REPUBLIC OF CHINA AND THE VIENNA SALES CONVENTION DR. JOHN S. MO* INTRODUCTION .............................................. 210 I. CODIFICATION OF CONTRACT LAW AND THE ISSUE OF UNIFORM ITY .......................................... 211 A. LEGAL TRADITION AND THE CODE OF CONTRACT LAW ..... 211 B. UNIFORMITY UNDER THE CODE OF CONTRACT LAW? ....... 215 I. THE RELATIONSHIP BETWEEN THE VIENNA SALES CONVENTION AND THE CODE OF CONTRACT LAW.. 217 III. THE MAKING OF A CONTRACT OF SALE UNDER THE CODE OF CONTRACT LAW ......................... 219 A . O VERVIEW ................................................ 219 B. CAPACITY TO CONTRACT .................................. 220 C. NEGOTIATION OF CONTRACTS ............................ 225 D. VALIDITY OF CONTRACT .................................. 230 IV. THE PERFORMANCE OF A CONTRACT UNDER THE CODE OF CONTRACT LAW .............................. 231 A . OVERVIEW ................................................ 231 B. THE TRANSFER OF PROPERTY .............................. 232 C. THE TRANSFER OF RISK ................................... 233 D. THE CONFORMITY OF GOODS .............................. 235 E. D ELIVERY ................................................ 238 F. PAYMENT OF PRICE ....................................... 239 V. REMEDIES FOR BREACH OF CONTRACT UNDER THE CODE OF CONTRACT LAW ......................... 241 A. GENERAL OVERVIEW ...................................... 241 * LL.B., Jilin University; LL.B., Monash University; LL.M., Dalhousie Uni￾versity; PhD, Sydney University; Associate Professor, Law School, City Univer￾sity of Hong Kong; Adjunct Professor, Jilin University Law School

210 AM.U.INT'L L.REV. [15:209 B.SUSPENSION OF CONTRACT................................ 242 C.TERMINATION OF CONTRACT.............................. 244 D.DAMAGES................................................ 250 E.SPECIFICPERFORMANCE......................... 253 VI.MAJOR FEATURES OF THE CODE OF CONTRACT LAW. 256 A.FUSION OF CONTRACTLAWS.............................. 256 B.UNCERTAINTIES AFFECTING A FOREIGN PARTY 258 C.INCONSISTENCIES ARISING FROM CERTAIN PROVISIONS OF THECoDE....................................262 D.LIABILITY ARISING FROM NEGOTIATION OF CONTRACT.....266 E.FLEXIBILITY OF THE WRITTEN FORMALITY.................268 CONCLUSION 269 INTRODUCTION China is one of the original signatories to the United Nations Con- vention on Contracts for the International Sale of Goods ("Conven- tion"or "Vienna Sales Convention").Recently,however,China adopted the Code of Contract Law of the People's Republic of China ("Code"or"Code of Contract Law")'that applies to contracts for the sale of goods,including the international sale of goods that may or may not be subject to the Convention. The Ninth National People's Congress("NPC")adopted the Code at its Second Session on March 15,1999.The passing of the Code was a long-awaited event.Several drafts of the Code were published in China in the 1990s and they solicited extensive interest from var- ied segments of the Chinese community.Criticism of the contents from certain sections of the community,however,generated rumors that a draft of the Code would not be presented for approval by the NPC at the Second Session. I.United Nations Convention on Contracts for the International Sale of Goods,Apr.11,1980,S.Treaty Doc.No.98-9,1489 U.N.T.S.3.U.N.Doc. A/CONF.97/18,Annex 1,reprinted in 19 [.L.M.668 (1980)[hereinafter Vienna Sales Convention]. 2.See CODE OF CONTRACT LAW (P.R.C),translated in Contract Law of the People's Republic of China,CHINA L.,June 5,1999,at 86 [hereinafter C.CONT. L.]

AM. U. INT' L. RE1 9 B. SUSPENSION OF CONTRACT ................................ 242 C. TERMINATION OF CONTRACT .............................. 244 D . D AM AGES ................................................. 250 E. SPECIFIC PERFORMANCE ................................... 253 VI. MAJOR FEATURES OF THE CODE OF CONTRACT L A W ........................................................ 256 A. FUSION OF CONTRACT LAWS .............................. 256 B. UNCERTAINTIES AFFECTING A FOREIGN PARTY ............ 258 C. INCONSISTENCIES ARISING FROM CERTAIN PROVISIONS OF TH E C O DE ................................................. 262 D. LIABILITY ARISING FROM NEGOTIATION OF CONTRACT ..... 266 E. FLEXIBILITY OF THE WRITTEN FORMALITY ................. 268 CON CLU SIO N ................................................. 269 INTRODUCTION China is one of the original signatories to the United Nations Con￾vention on Contracts for the International Sale of Goods ("Conven￾tion" or "Vienna Sales Convention").' Recently, however, China adopted the Code of Contract Law of the People's Republic of China ("Code" or "Code of Contract Law")2 that applies to contracts for the sale of goods, including the international sale of goods that may or may not be subject to the Convention. The Ninth National People's Congress ("NPC") adopted the Code at its Second Session on March 15, 1999. The passing of the Code was a long-awaited event. Several drafts of the Code were published in China in the 1990s and they solicited extensive interest from var￾ied segments of the Chinese community. Criticism of the contents from certain sections of the community, however, generated rumors that a draft of the Code would not be presented for approval by the NPC at the Second Session. I . United Nations Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, S. Treaty Doc. No. 98-9, 1489 U.N.T.S. 3, U.N. Doc. A/CONF. 97/18, Annex 1, reprinted in 19 I.L.M. 668 (1980) [hereinafter Vienna Sales Convention]. 2 . See CODE OF CONTRACT LAW (P.R.C), translated in Contract Law of the People's Republic of China, CHINA L., June 5, 1999, at 86 [hereinafter C. CONT. 210 [15:209

1999] PRC CODE OF CONTRACT LAW 211 This Essay discusses some imperfections of the present Code of Contract Law and compares the provisions of the Code concerning sale of goods with those of the Convention to determine their relative consistency.This Essay also investigates the possibility of conflict between the Code and the Convention under the present legal system of the People's Republic of China ("PRC").Notwithstanding the foregoing flaws,the Code took effect on October 1.1999.Accord- ingly,the new features of the Code will also be discussed,describing the characteristics and operation of the Code of Contract Law in China I.CODIFICATION OF CONTRACT LAW AND THE ISSUE OF UNIFORMITY A.LEGAL TRADITION AND THE CODE OF CONTRACT LAW Mainland China's legal system is similar in large part to the conti- nental law adopted in France,Germany,Japan,and Taiwan.Codes of law that ensure uniformity in legislation are preferred in such legal systems.Contract law is regarded as an independent branch of law in both the common law and continental law tradition.While the com- mon law tradition builds its contract law on the combined basis of case law precedent and statutes,the continental law tradition places contract law under the broader subject heading of civil and commer- cial law.Achieving uniformity and building a legal framework for a system that demonstrates a logical connection between "the tree and branches,"are among the motivations and goals of the codification of laws in China.The codification of the Code is consistent with this East-Asian concept of the continental model. Ideally,under the continental law model,a state will first develop a foundation of law before moving to specific rules.The legal reform movements carried out at the end of nineteenth century by the Qing Dynasty in China are a good demonstration of the foregoing.A more recent illustration is the passage of the Code of the General Princi- ples of Civil Law ("GPCL")'in 1986,which represents the half of the Code of a Civil Law that is intended to cover all legal relation- 3.CODE OF THE GENERAL PRINCIPLES OF CIVIL LAW (P.R.C.),translated in 34 AM. J.COMP.L.715 (1986)[hereinafter C.CIv.L.]

PRC CODE OF CONTR4 CT LAW This Essay discusses some imperfections of the present Code of Contract Law and compares the provisions of the Code concerning sale of goods with those of the Convention to determine their relative consistency. This Essay also investigates the possibility of conflict between the Code and the Convention under the present legal system of the People's Republic of China ("PRC"). Notwithstanding the foregoing flaws, the Code took effect on October 1, 1999. Accord￾ingly, the new features of the Code will also be discussed, describing the characteristics and operation of the Code of Contract Law in China. I. CODIFICATION OF CONTRACT LAW AND THE ISSUE OF UNIFORMITY A. LEGAL TRADITION AND THE CODE OF CONTRACT LAW Mainland China's legal system is similar in large part to the conti￾nental law adopted in France, Germany, Japan, and Taiwan. Codes of law that ensure uniformity in legislation are preferred in such legal systems. Contract law is regarded as an independent branch of law in both the common law and continental law tradition. While the com￾mon law tradition builds its contract law on the combined basis of case law precedent and statutes, the continental law tradition places contract law under the broader subject heading of civil and commer￾cial law. Achieving uniformity and building a legal framework for a system that demonstrates a logical connection between "the tree and branches," are among the motivations and goals of the codification of laws in China. The codification of the Code is consistent with this East-Asian concept of the continental model. Ideally, under the continental law model, a state will first develop a foundation of law before moving to specific rules. The legal reform movements carried out at the end of nineteenth century by the Qing Dynasty in China are a good demonstration of the foregoing. A more recent illustration is the passage of the Code of the General Princi￾ples of Civil Law ("GPCL"); in 1986, which represents the half of the Code of a Civil Law that is intended to cover all legal relation- 3. CODE OFTHE GENERAL PRINCIPLES OF CIVIL LAW (P.R.C.), translated in 34 AM. J. COMP. L. 715 (1986) [hereinafter C. CIV. L.]. 1999]

212 AM.U.INT'L L.REV. [15:209 ships of civil and commercial nature in the PRC by providing both general principles and specific rules.In a period of China's history, when the guidance of legal principles is vital in order to deal with the multitude of legal relationships created every day in China,such a comprehensive code of civil law,requiring a process of thorough de- liberation and extensive consultations,has proven impossible to im- plement.Consequently,to date,China's civil law code only consists of general principles. For similar reasons articulated,a code of contract law was not pos- sible in the 1970s and 1980s when China increasingly began to open its doors to the outside world and carried out wide economic reforms throughout the country.Rules of contract law were developed in China between the 1970s and 1980s without a systematic foundation of contract theory.Prior to that time,contract law had no official role in the planned economy and state-controlled market.In order to meet the practical needs of the economic reform,three laws were formed. First,in 1981,the Economic Contract Law of the PRC was estab- lished,which largely applies to contracts between Chinese parties. Soon after,in 1985,the Foreign Economic Contract Law'was passed,which applies to contracts involving a foreign party.Finally, in 1987,the Technology Contract Law was passed,which regulates the transfer of technology between Chinese parties.These three laws together formed the basis for more than a dozen by-laws,regulations, rules,and measures to regulate various aspects of contract law in the PRC,or various types of contracts.A lack of uniformity,certainty, and clarity,however,became a serious issue among all these laws and regulations,thereby threatening stability,efficiency,and fairness in commercial transactions.A number of gray areas existed because the "tree and branches"of the contract law were not logically con- nected.In the absence of general principles in many crucial areas of contract law,commercial relationships were placed in limbo.The 4.ECONOMIC CONTRACT LAW (P.R.C.),translated in 22 I.L.M.330 (1983) [hereinafter ECON.CONT.L.]. 5.FOREIGN ECONOMIC CONTRACT LAW(P.R.C.),translated in 24 I.L.M.799 (1985)[hereinafter FOREIGN ECON.CONT.L.]. 6.TECHNOLOGY CONTRACT LAW (P.R.C.),translated in China Law (visited Sept.4,1999)<http://www.qis.net/chinalaw/prclaw21.htm>[hereinafter TECH. CoNT.L.]

AM. U. INT' L. REV. ships of civil and commercial nature in the PRC by providing both general principles and specific rules. In a period of China's history, when the guidance of legal principles is vital in order to deal with the multitude of legal relationships created every day in China, such a comprehensive code of civil law, requiring a process of thorough de￾liberation and extensive consultations, has proven impossible to im￾plement. Consequently, to date, China's civil law code only consists of general principles. For similar reasons articulated, a code of contract law was not pos￾sible in the 1970s and 1980s when China increasingly began to open its doors to the outside world and carried out wide economic reforms throughout the country. Rules of contract law were developed in China between the 1970s and 1980s without a systematic foundation of contract theory. Prior to that time, contract law had no official role in the planned economy and state-controlled market. In order to meet the practical needs of the economic reform, three laws were formed. First, in 1981, the Economic Contract Law of the PRC4 was estab￾lished, which largely applies to contracts between Chinese parties. Soon after, in 1985, the Foreign Economic Contract Law' was passed, which applies to contracts involving a foreign party. Finally, in 1987, the Technology Contract Law6 was passed, which regulates the transfer of technology between Chinese parties. These three laws together formed the basis for more than a dozen by-laws, regulations, rules, and measures to regulate various aspects of contract law in the PRC, or various types of contracts. A lack of uniformity, certainty, and clarity, however, became a serious issue among all these laws and regulations, thereby threatening stability, efficiency, and fairness in commercial transactions. A number of gray areas existed because the "tree and branches" of the contract law were not logically con￾nected. In the absence of general principles in many crucial areas of contract law, commercial relationships were placed in limbo. The 4. ECONOMIC CONTRACT LAW (P.R.C.), translated in 22 I.L.M. 330 (1983) [hereinafter ECON. CONT. L.]. 5. FOREIGN ECONOMIC CONTRACT LAW (P.R.C.), translated in 24 I.L.M. 799 (1985) [hereinafter FOREIGN ECON. CONT. L.]. 6. TECHNOLOGY CONTRACT LAW (P.R.C.), translated in China Law (visited Sept. 4, 1999) <http://www.qis.net/chinalaw/prclaw2I.htm> [hereinafter TECH. CONT. L.]. [15:209