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

1999] PRC CODE OF CONTRACT LAI 223 der Chinese law.The capacity of an entity to contract depends,to a great extent,on its ability to satisfy the requirements of a legal per- son under Chinese law.Only the companies and organizations that meet the description of"legal person"may act as legal persons in China.The legal person's capacity to contract may be affected by its scope of business as registered or approved by the relevant authori- ties.A contract for international sale may be declared void if the Chinese party does not have the so-called"foreign trading right."A domestic contract for the sale of goods may also be declared void if the business scope of a party does not cover the goods sold in the contract,or the parties do not have the capacity to perform the con- tract.Although such reasoning may appear disconcerting to a com- mon law lawyer,Chinese courts continue to treat the approved scope of business as an issue of capacity.This is because engaging in a business transaction outside the approved scope of business is re- garded to be illegal in most circumstances.Similarly,a settlement agreement reached during the mediation process conducted by a court may be set aside by that court if the agreement requires a party to perform an act falling outside its scope of business.The above 62.See id.art.51 (acquiring status as a legal person is conditioned upon the competent authority's approval and registration). 63.See 1 SELECTED CASES OF THE PEOPLE'S COURT 104-08(Institute for Prac- tical Legal Research of the National Supreme Court ed.)(Publishing House of the People's Court 1992)(in Chinese)(discussing the case of Base Construction Cor- poration (Henan)of China Exported Commodities v.Foreign Trade Development Company of Shenzhen).In Base Construction Corporation (Henan)of Chinu Ex- ported Commodities v.Foreign Trade Development Company of Shenzhen,the parties contracted to sell a quantity of mung bean and sesame seed.See id.The seller's supplier was prohibited from selling the products concemed by the local Administration for Industry and Commerce because the supplier did not have a li- cense to sell the products.See id.Thus the contract was not performed.See id.The parties accused each other of breach of contract.The court of appeals held the contract to be unenforceable because the seller was incapable of performing its ob- ligations under the contract and thereby ordered the parties to share the losses in- curred.See id. 64.See LIN ZHONG,SETTLEMENT OF COMMERCIAL DISPUTES IN CHINA 203-04 (H.K.Joint Pub.Co.Ltd.,1998)(in Chinese)(discussing the case of Construc- tion Company v.Trading Company of Shuchang).In X Construction Compuny v. Trading Company of Shuchang,the defendant sold to the plaintiff 300 tons of coil steel in 1991 and the defendant delivered only 20 tons of coil steel.which did not meet contract description.See id.The court in 1992 mediated the dispute and the defendant agreed to deliver 280 tons of coil steel meeting the description.See id

PRC CODE OF CONTRACTL.4% der Chinese law.62 The capacity of an entity to contract depends, to a great extent, on its ability to satisfy the requirements of a legal per￾son under Chinese law. Only the companies and organizations that meet the description of "legal person" may act as legal persons in China. The legal person's capacity to contract may be affected by its scope of business as registered or approved by the relevant authori￾ties. A contract for international sale may be declared void if the Chinese party does not have the so-called "foreign trading right." A domestic contract for the sale of goods may also be declared void if the business scope of a party does not cover the goods sold in the contract, or the parties do not have the capacity to perform the con￾tract. 3 Although such reasoning may appear disconcerting to a com￾mon law lawyer, Chinese courts continue to treat the approved scope of business as an issue of capacity. This is because engaging in a business transaction outside the approved scope of business is re￾garded to be illegal in most circumstances. Similarly, a settlement agreement reached during the mediation process conducted by a court may be set aside by that court if the agreement requires a party to perform an act falling outside its scope of business.' The above 62. See id. art. 51 (acquiring status as a legal person is conditioned upon the competent authority's approval and registration). 63. See 1 SELECTED CASES OF THE PEOPLE'S COURT 104-08 (Institute for Prac￾tical Legal Research of the National Supreme Court ed.) (Publishing House of the People's Court 1992) (in Chinese) (discussing the case of Base Construction Cor￾poration (Henan) of China Exported Connodities v. Foreign Trade Development Company of Shenzhen). In Base Construction Corporation (Henan) of China Er￾ported Commodities v. Foreign Trade Development Company of Shenzien, the parties contracted to sell a quantity of mung bean and sesame seed. See idL The seller's supplier was prohibited from selling the products concerned by the local Administration for Industry and Commerce because the supplier did not have a li￾cense to sell the products. See id. Thus the contract was not performed. See hi. The parties accused each other of breach of contract. The court of appeals held the contract to be unenforceable because the seller was incapable of performing its ob￾ligations under the contract and thereby ordered the parties to share the losses in￾curred. See id. 64. See LIN ZHONG, SETTLEMENT OF COMMERCIAL DISPUTES IN CHINA 203-04 (H.K. Joint Pub. Co. Ltd., 1998) (in Chinese) (discussing the case of X Construc￾tion Conpany v. Trading Company of Shuchang). In X Construction Companv 1. Trading Comipany of Shuchang, the defendant sold to the plaintiff 300 tons of coil steel in 1991 and the defendant delivered only 20 tons of coil steel, which did not meet contract description. See id. The court in 1992 mediated the dispute and the defendant agreed to deliver 280 tons of coil steel meeting the description. See iL 1999]

224 AM.U.INT'L L.REV. [15:209 mentioned rules governing the contract made by an agent also apply to the contract where a legal person is the principal."In addition,a legal person is also liable in contract to a bona fide contracting party who reasonably relied on the apparent authority of the legal repre- sentative or responsible person of the legal person."The foregoing rules govern the legal person's capacity to contract in Chinese law. Third,the Code recognizes the right of an organization,which is not a legal person to conclude a contract.This is a new develop- ment in the civil law of the PRC.The GPCL only recognizes two types of entities as subjects of civil rights,natural or legal persons. The GPCL thereby implies that an organization that is not a legal person is incapable of performing an act of civil law.While Article 2 of the Code permits"other organizations,"besides a natural or legal person,to conclude a contract,the meaning of"organization"in this context is unclear in the Chinese jurisprudence.It is possible that "organization"refers to a government organization or any other so- cial,political,or economic organization that enters into a commercial contract with another party.The organization must be allowed to enjoy the relevant right and be required to undertake the relevant li- ability for the purpose of ensuring stability and fairness in commer- cial transactions.Article 2 of the Code suggests that a government organization or department engaged in a commercial activity may be liable to the other contracting party,even though this proposition Later the defendant failed to perform the agreement because it had no goods to de- liver and the plaintiff applied to the court for a review of the settlement agreement under the review process of the court.See id.The court set aside the settlement agreement on the ground that the agreement was impossible to perform because the defendant's scope of business did not cover steel products.See id. 65.See C.CONT.L.,supra note 2,art.50(defining the agency aspects of the legal person classification). 66.See id.(suggesting that a contracting party who "knows or ought to know" that the legal person's agent is not acting within his or her authority will not suc- ceed in a claim against the legal person). 67.See id.art.2(identifying this group simply as"other"organizations). 68.See C.CIv.L.,supra note 3,art.54 (defining an act of civil law as the "lawful acts by which citizens or legal persons establish,modify or terminate civil rights and duties"). 69.See C.CoNT.L.,supra note 2,art.2

AM. U. INT'L L. REV[ mentioned rules governing the contract made by an agent also apply to the contract where a legal person is the principal." In addition, a legal person is also liable in contract to a bona fide contracting party who reasonably relied on the apparent authority of the legal repre- 66 sentative or responsible person of the legal person. The foregoing rules govern the legal person's capacity to contract in Chinese law. Third, the Code recognizes the right of an organization, which is not a legal person to conclude a contract. 7 This is a new develop￾ment in the civil law of the PRC. The GPCL only recognizes two61 types of entities as subjects of civil rights, natural or legal persons. The GPCL thereby implies that an organization that is not a legal person is incapable of performing an act of civil law. While Article 2 of the Code permits "other organizations," besides a natural or legal person, to conclude a contract, the meaning of "organization" in this context is unclear in the Chinese jurisprudence. It is possible that "organization" refers to a government organization or any other so￾cial, political, or economic organization that enters into a commercial contract with another party. The organization must be allowed to enjoy the relevant right and be required to undertake the relevant li￾ability for the purpose of ensuring stability and fairness in commer￾cial transactions. Article 2 of the Code suggests that a government organization or department engaged in a commercial activity may be liable to the other contracting party," even though this proposition Later the defendant failed to perform the agreement because it had no goods to de￾liver and the plaintiff applied to the court for a review of the settlement agreement under the review process of the court. See id. The court set aside the settlement agreement on the ground that the agreement was impossible to perform because the defendant's scope of business did not cover steel products. See id. 65. See C. CONT. L., supra note 2, art. 50 (defining the agency aspects of the legal person classification). 66. See id. (suggesting that a contracting party who "knows or ought to know" that the legal person's agent is not acting within his or her authority will not suc￾ceed in a claim against the legal person). 67. See id. art. 2 (identifying this group simply as "other" organizations). 68. See C. Civ. L., supra note 3, art. 54 (defining an act of civil law as the "lawful acts by which citizens or legal persons establish, modify or terminate civil rights and duties"). 69. See C. CONT. L., supra note 2, art. 2. [15:209

1999] PRC CODE OF CONTRACT LAI 225 has no basis in the GPCL.In relation to the contract made by an or- ganization that is not a person,the Code provides guidance for as- certaining the legality of such a contract. The foregoing discussion has focused upon the capacity to con- tract under the Code and the GPCL.Some of the rules are merely supplementary to the provisions of the Convention relating to the identity of the parties to a contract of international sale.If,for what- ever reason however,the Convention does not apply to a particular contract of international sale,the applicable provisions of the Code and the GPCL apply exclusively to the contract. C.NEGOTIATION OF CONTRACTS "Negotiation of contracts"refers to the whole negotiation process leading up to the conclusion of a contract.The process always begins with an offer,or invitation,followed by an acceptance or counter- offer,and ends with the conclusion of a contract.The Convention sets out specific rules on offer and acceptance.In contrast to the common law rules on offer and acceptance,the Convention is more systematic,comprehensive,and certain.Articles 13 through 34 of the Code deal with the formality of offer and acceptance.In general, these provisions are similar to the relevant provisions of the Conven- tion.It must be emphasized,however,that Article 10 of the Code adopted the same position as Article 11 of the Convention,giving ef- fect to an oral contract which may or may not be supported by any written evidence.Article 10 of the Code states that a contract can be made between parties in written,oral,or any other form.Under this provision,the written form is required only when the relevant law expressly requires it or if the parties mutually agree.This represents one of the crucial changes in Chinese contract law.Article 7 of the Foreign Economic Contract Law specifically states that a foreign economic contract must be made in writing.China made a reserva- tion when it ratified the Convention to deny the effect of an oral contract."This Chinese reservation to the Vienna Sales Convention 70.See Vienna Sales Convention,supra note 1,arts.14-24 (regulating the for- mation of contracts under the Convention). 71.See C.CoNT.L.,supra note 2,art.10. 72.See Status of UNCITRAL Conventions and Model Laws (visited Sept.4

PRC CODE OF CONTRACTLA W has no basis in the GPCL. In relation to the contract made by an or￾ganization that is not a person, the Code provides guidance for as￾certaining the legality of such a contract. The foregoing discussion has focused upon the capacity to con￾tract under the Code and the GPCL. Some of the rules are merely supplementary to the provisions of the Convention relating to the identity of the parties to a contract of international sale. If, for what￾ever reason however, the Convention does not apply to a particular contract of international sale, the applicable provisions of the Code and the GPCL apply exclusively to the contract. C. NEGOTIATION OF CONTRACTS "Negotiation of contracts" refers to the whole negotiation process leading up to the conclusion of a contract. The process always begins with an offer, or invitation, followed by an acceptance or counter￾offer, and ends with the conclusion of a contract. The Convention sets out specific rules on offer and acceptance. " In contrast to the common law rules on offer and acceptance, the Convention is more systematic, comprehensive, and certain. Articles 13 through 34 of the Code deal with the formality of offer and acceptance. In general, these provisions are similar to the relevant provisions of the Conven￾tion. It must be emphasized, however, that Article 10 of the Code adopted the same position as Article 11 of the Convention, giving ef￾fect to an oral contract which may or may not be supported by any written evidence. Article 10 of the Code states that a contract can be made between parties in written, oral, or any other form. Under this provision, the written form is required only when the relevant law expressly requires it or if the parties mutually agree." This represents one of the crucial changes in Chinese contract law. Article 7 of the Foreign Economic Contract Law specifically states that a foreign economic contract must be made in writing. China made a reserva￾tion when it ratified the Convention to deny the effect of an oral contract.7 This Chinese reservation to the Vienna Sales Convention 70. See Vienna Sales Convention, supra note 1, arts. 14-24 (regulating the for￾mation of contracts under the Convention). 71. See C. CONT. L., supra note 2, art. 10. 72. See Status of UNCITRAL Conventions and Model Laws (visited Sept. 4, 1999]

226 AM.U.INT'L L.REV. [15:209 should be amended consistently with the Code.The recognition of the oral contract increases flexibility in commercial transactions and makes the use of oral evidence possible in a dispute arising from a contract in the PRC.This change also reduces the difference between the common law contract rules,such as those practiced in Hong Kong,and the contract rules of mainland China with regard to the formation of contracts. The provisions of the Code and the Convention governing the formation of contracts share several similarities,including the fol- lowing:(1)both recognize written and oral contracts;(2)both rec- ognize telegram and telex as writing forms;"(3)both differentiate between an offer and an invitation;"5(4)both give effect to an offer when it reaches the offeree;"(5)both permit an offer to be with- drawn if the withdrawal reaches the offeree before or at the same time as the offer;"(6)both permit an offer to be revoked if the revo- cation reaches the offeree before he or she dispatches an accep- tance;"(7)both hold an offer irrevocable if the offer is irrevocable expressly or implicitly or if the offeree has acted by relying on a rea- sonable belief that the offer is irrevocable;"(8)both recognize that an acceptance may be made by a notice of statement,or any other 1999),available in <http://www.jus.uio.uo/lm/un.conventions.membership.status/ x.00-un.Contracts.International.Sale.of.Goods.Convention.1980.html>(recording the PRC's reservation of Article 1,para.(1)(b)and Article 11,in addition to other provisions relating to Article 11). 73.Compare C.CoNT.L.,supra note 2,art.10,with Vienna Sales Convention, supra note 1,art.11. 74.Compare C.CoNT.L.,supra note 2,art.11,with Vienna Sales Convention, supra note 1,art.13. 75.Compare C.CONT.L.,supra note 2,art.15,with Vienna Sales Convention, supra note 1,art.14. 76.Compare C.CoNT.L.,supra note 2,art.16,with Vienna Sales Convention. supra note 1,art.15(1). 77.Compare C.CoNT.L.,supra note 2,art.17,with Vienna Sales Convention, supra note 1,art.15(2). 78.Compare C.CONT.L.,supra note 2,art.18,with Vienna Sales Convention, supra note 1,art.13. 79.Compare C.CoNT.L..supra note 2,art.19,with Vienna Sales Convention. supra note 1,art.16(2)

AM. U. INT'L L. RE[1 should be amended consistently with the Code. The recognition of the oral contract increases flexibility in commercial transactions and makes the use of oral evidence possible in a dispute arising from a contract in the PRC. This change also reduces the difference between the common law contract rules, such as those practiced in Hong Kong, and the contract rules of mainland China with regard to the formation of contracts. The provisions of the Code and the Convention governing the formation of contracts share several similarities, including the fol￾lowing: (1) both recognize written and oral contracts; 3 (2) both rec￾ognize telegram and telex as writing forms; 74 (3) both differentiate between an offer and an invitation;" (4) both give effect to an offer when it reaches the offeree; 6 (5) both permit an offer to be with￾drawn if the withdrawal reaches the offeree before or at the same time as the offer;7 ' (6) both permit an offer to be revoked if the revo￾cation reaches the offeree before he or she dispatches an accep￾tance; 78 (7) both hold an offer irrevocable if the offer is irrevocable expressly or implicitly or if the offeree has acted by relying on a rea￾sonable belief that the offer is irrevocable;7 9 (8) both recognize that an acceptance may be made by a notice of statement, or any other 1999), available in <http://www.jus.uio.uo/lm/un.conventions.membership.status/ x.00-un.Contracts.International.Sale.of.Goods.Convention. 1980.html> (recording the PRC's reservation of Article 1, para. (1)(b) and Article 11, in addition to other provisions relating to Article 11). 73. Compare C. CONT. L., supra note 2, art. 10, with Vienna Sales Convention, supra note 1, art. 11. 74. Compare C. CONT. L., supra note 2, art. 11, with Vienna Sales Convention, supra note 1, art. 13. 75. Compare C. CONT. L., supra note 2, art. 15, with Vienna Sales Convention, supra note 1, art. 14. 76. Compare C. CONT. L., supra note 2, art. 16, with Vienna Sales Convention, supra note 1, art. 15(1). 77. Compare C. CONT. L., supra note 2, art. 17, with Vienna Sales Convention, supra note 1, art. 15(2). 78. Compare C. CONT. L., supra note 2, art. 18, with Vienna Sales Convention, supra note 1, art. 13. 79. Compare C. CONT. L., supra note 2, art. 19, with Vienna Sales Convention, supra note 1, art. 16(2). 226 [15:209

1999] PRC CODE OF CONTRACT LAW 227 means agreed by or acceptable to the contracting parties:(9)both state that an acceptance should reach the offeror within the stipulated time or within a reasonable time;(10)both adopt the same criteria for the calculation of the period of time for acceptance:(11)both regard a contract to have been made when the offeree's acceptance becomes effective;(12)both permit an acceptance to be withdrawn before or at the same time when it reaches the offeror;(13)both give the offeror a right to choose whether to accept a late accep- tance;(14)both adopt the same criteria for differentiating an ac- ceptance from a counter-offer;and(15)both adopt similar criteria for assuming the offeror's acceptance of insignificant modifications in the offeree's acceptance. Based upon these similarities,it is apparent that the Code is largely compatible with or similar to many provisions of the Con- vention.Arguably,most provisions of the Code regulating offer and acceptance are based on the model provisions of the Convention. Such similarities between the Code and the Convention reflect a consistent approach that may be applicable to contracts of interna- tional sale in China.The differences between them,however,repre- sent direct and indirect inconsistencies,which may not always be re- solved by the prevalence of the Convention.The major differences 80.Compare C.CoNT.L.,supra note 2,art.22,with Vienna Sales Convention, supra note 1,art.18(1). 81.Compare C.CoNT.L.,supra note 2,art.23.with Vienna Sales Convention, supra note 1,art.18(2). 82.Compare C.CoNT.L.,supra note 2,art.24.with Vienna Sales Convention. supra note 1,art.20(1)(a). 83.Compare C.CoNT.L.,supra note 2.art.25.with Vienna Sales Convention, supra note 1,art.23. 84.Compare C.CONT.L..supra note 2,art.27,with Vienna Sales Convention, supra note 1,art.22. 85.Compare C.CoNT.L.,supra note 2.art.28.with Vienna Sales Convention, supra note 1,art.21(1). 86.Compare C.CoNT.L.,supra note 2,art.30,with Vienna Sales Convention, supra note 1,arts.19(1),19(3). 87.Compare C.CoNT.L.,supra note 2,art.31.with Vienna Sales Convention, supra note 1,art.19(2)

PRC CODE OF CONTRACT LA 22 means agreed by or acceptable to the contracting parties;"' (9) both state that an acceptance should reach the offeror within the stipulated time or within a reasonable time;"' (10) both adopt the same criteria for the calculation of the period of time for acceptance;2" (11) both regard a contract to have been made when the offeree's acceptance becomes effective; 3 (12) both permit an acceptance to be withdrawn before or at the same time when it reaches the offeror;" (13) both give the offeror a right to choose whether to accept a late accep￾tance; 5 (14) both adopt the same criteria for differentiating an ac￾ceptance from a counter-offer; 6 and (15) both adopt similar criteria for assuming the offeror's acceptance of insignificant modifications in the offeree's acceptance. 7 Based upon these similarities, it is apparent that the Code is largely compatible with or similar to many provisions of the Con￾vention. Arguably, most provisions of the Code regulating offer and acceptance are based on the model provisions of the Convention. Such similarities between the Code and the Convention reflect a consistent approach that may be applicable to contracts of interna￾tional sale in China. The differences between them, however, repre￾sent direct and indirect inconsistencies, which may not always be re￾solved by the prevalence of the Convention. The major differences 80. Compare C. CONT. L., supra note 2, art. 22, with supra note 1, art. 18(l). 81. Compare C. CONT. L., supra note 2, art. 23, with supra note 1, art. 18(2). 82. Compare C. CONT. L., supra note 2, art. 24, with supra note 1, art. 20(1)(a). 83. Compare C. CONT. L., supra note 2, art. 25, with supra note 1, art. 23. 84. Compare C. CONT. L., supra note 2, art. 27, with supra note 1, art. 22. 85. Compare C. CONT. L., supra note 2, art. 28, with supra note 1, art. 2 1(1). 86. Compare C. CONT. L., supra note 2, art. 30, with supra note 1, arts. 19(1), 19(3). Vienna Sales Convention, Vienna Sales Convention, Vienna Sales Convention, Vienna Sales Convention Vienna Sales Convention, Vienna Sales Convention, Vienna Sales Convention, 87. Compare C. CONT. L., supra note 2, art. 31. with Vienna Sales Convention, supra note 1, art. 19(2). 1999] 227