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Contract Law (1999.10.1)

(Adopted and Promulgated by the Second Session of the Ninth National People's Congress March 15, 1999.) 

 

Chapter I  General Principles

Article 1 This Law is enacted to protect the lawful rights and interests of the contracting parties, to maintain social and economic order and to promote socialist modernization.

 

Article 2 A contract referred to in this Law is an agreement among natural persons, legal persons and/or other organizations as equal parties for the establishment, modification or termination of a relationship involving the civil rights and obligations of such entities.

Agreements with respect to personal relationships such as marriage, adoption, guardianship, etc., shall be governed by the provisions in other laws.

 

Article 3 The parties to a contract shall have equal legal status, and no party shall impose its own will upon the other party.

 

Article 4 The parties have the right to lawfully enter into a contract of their own free will, and no entity or individual shall unlawfully interfere therewith.

 

Article 5 In defining their respective rights and obligations, the parties shall adhere to the principle of fairness.

 

Article 6 In exercising their rights and performing their obligations, the parties shall observe the principles of honesty and good faith.

 

Article 7 In forming and performing a contract, the parties shall comply with the laws and administrative regulations, respect social morals, and shall not disrupt the social and economic order or impair the social and public interests.

 

Article 8 A contract formed under the law shall be legally binding on the parties thereto, each of whom shall perform its own obligations as agreed, and no party shall unilaterally alter or rescind the contract.

A contract lawfully formed shall receive protection under the law.

 

Chapter II  Contract Formation

Article 9 In forming a contract, the parties shall possess the appropriate capacities for civil rights and civil acts.

A party may lawfully authorize an agent to enter into a contract on its behalf.

 

Article 10 In forming a contract, the parties may use written, oral or other forms.

Where the laws and administrative regulations so provide, a written form shall be adopted. Where the parties so agree, a written form shall be adopted.

 

Article 11 "Written form" means a form such as a written contractual instrument, letter, electronic data text (including a telegram, telex, facsimile, electronic data exchange and electronic mail) that can tangibly express the contents contained therein.

 

Article 12 The contents of a contract are to be agreed by the parties. Such contents generally include the following:

(1) name and domicile of each party;

(2) subject matter;

(3) quantity;

(4) quality;

(5) price or remuneration;

(6) specified time, place and manner of performance;

(7) liability for breach of contract; and

(8) method of dispute resolution.

In forming a contract, the parties may refer to texts of various model contracts.

 

Article 13 In forming a contract, the parties shall adopt the method of offer and acceptance.

 

Article 14 An offer is the expression of an intent to enter into a contract with another person. Such expression of intent shall conform to the following:

(1) the contents are specific and definite; and

(2) it is clearly expressed that once the offeree accepts, such expression of intent shall be binding upon the offeror.

 

Article 15 An invitation to offer is an expression of intent by a person to have another person tender an offer to him or her. Price lists that are mailed or delivered, public announcements of auctions, public announcements of invitations to tender a bid, stock offering prospectuses, commercial advertisements, etc., are invitations to offer.

Where the contents of a commercial advertisement conform to the provisions concerning offers, such advertisement shall be deemed to be an offer.

 

Article 16 An offer shall become effective once it reaches the offeree.

If a contract is concluded in the form of electronic data text and the addressee designates a particular system through which to receive the electronic data text, the time it enters the particular system shall be deemed the arrival time. If no particular system is designated, the time the electronic data text first enters any system of the addressee shall be deemed the arrival time.

 

Article 17 An offer may be withdrawn. The notification of withdrawal of the offer must reach the offeree prior to or at the same time the offer reaches the offeree.

 

Article 18 An offer may be revoked. The notification of the revocation of the offer must reach the offeree prior to the dispatch of the notification of acceptance by the offeree.

 

Article 19 An offer shall not be revoked under any of the following circumstances:

(1) the offeror specifies a time limit for acceptance or clearly indicates in another manner that the offer is irrevocable; or

(2) the offeree has grounds to believe that the offer is irrevocable and has already carried out preparatory work for the performance of the contract.

 

Article 20 An offer shall become void if:

(1) the notification of the rejection of the offer reaches the offeror;

(2) the offeror revokes the offer in accordance with the law;

(3) the offeree fails to accept the offer before the expiration of the time limit for acceptance; or

(4) the offeree makes a material alteration to the contents of the offer.

 

Article 21 An acceptance is the expression of an intent by the offeree to assent to the offer.

 

Article 22 An acceptance shall be given in the form of a notice, except where acceptance may be given by an act on the basis of customary business practice or as expressed in the offer.

 

Article 23 The acceptance shall reach the offeror within the time specified in the offer.

Where the offer does not specify a time limit for acceptance, the arrival of the acceptance shall be determined in accordance with the following provisions:

(1) unless otherwise agreed by the parties, if the offer is made verbally, the acceptance shall be made immediately;

(2) if the offer is not made verbally, the acceptance shall arrive within a reasonable period.

 

Article 24 If an offer is made by letter or telegram, the time limit for acceptance shall accrue from the date indicated on the letter or from the date the telegram is submitted for transmission. If the letter is not dated, the time limit for acceptance shall accrue from the postmark date on the letter. When the offer is made using a rapid form of communication such as the telephone or facsimile, the time limit for acceptance shall accrue from the time the offer reaches the offeree.

 

Article 25 A contract is concluded when the acceptance becomes effective.

 

Article 26 A notice of acceptance shall become effective once it reaches the offeror. Where notice of acceptance is not required, the acceptance shall become effective upon the act of acceptance based on customary business practice or the requirements in the offer.

If electronic data text is used to form the contract, the provisions in Article 16, Section 2 of this Law shall apply as to the time of arrival of the acceptance.

 

Article 27 An acceptance may be withdrawn. The notice of withdrawal of acceptance shall reach the offeror prior to or at the same time the notice of acceptance reaches the offeror.

 

Article 28 If the offeree dispatches the acceptance after the time limit for acceptance has expired, such acceptance shall constitute a new offer, unless the offeror notifies the offeree in a timely manner that the acceptance is valid.

 

Article 29 If the offeree dispatches its acceptance within the time specified for acceptance, and under normal circumstances the acceptance would have reached the offeror in time, but due to other reasons the acceptance reaches the offeror after the time limit for acceptance has expired, such acceptance shall be valid, unless the offeror notifies the offeree in a timely manner that it does not accept the acceptance due to the failure of the acceptance to arrive within the time limit.

 

Article 30 The contents of the acceptance shall be identical to the contents of the offer. A material alteration made by the offeree to the contents of the offer shall constitute a new offer. Alterations such as those concerning the subject matter, quantity, quality, price or remuneration, specified time of performance, place and manner of performance, liability for breach, dispute resolution, etc., under the contract are material alterations to the contents of an offer.

 

Article 31 Unless the offeror objects to the alteration to the offer in a timely manner or the offer clearly indicates that the acceptance shall not make any alterations to the contents of the offer, an acceptance that contains a non-material alteration to the contents of the offer shall be valid, and the contents of the contract shall be based upon the contents of the acceptance.

 

Article 32 Where the parties form a contract using a written contract, the contract is concluded at the time both parties sign the contract or affix their seals thereon.

 

Article 33 In forming a contract using a letter or electronic data text, etc., the parties may, prior to the conclusion of the contract, require the signing of a written confirmation. The contract is concluded at the time of the signing of the written confirmation.

 

Article 34 The place of the conclusion of the contract is the place where the acceptance becomes effective.

If the contract is formed using electronic data text, the place of the conclusion of the contract is the principal place of business of the addressee. In the absence of a principal place of business, the place of the conclusion of the contract is the addressee's usual residence. If the parties agree otherwise, such agreement shall apply.

 

Article 35 If the parties form a contract using a contractual instrument, the place of the conclusion of the contract is the place where the parties sign or affix their seals on the contract.

 

Article 36 Where the laws or administrative regulations provide that the contract be in written form or where the parties agree to form a contract in written form, and the parties fail to use a written form, but one party has already performed its principal obligations which have been accepted by the other party, the contract is concluded.

 

Article 37 If the contract is formed using a written contractual instrument, and prior to the signing of, or affixing of seals to, the contract, one party has already performed its principal obligations which have been accepted by the other party, such contract is concluded.

 

Article 38 If the State, based on its needs, issues a mandatory assignment or an assignment with respect to an order for goods for the State, the relevant legal persons and/or the other organizations shall enter into a contract on the basis of the rights and obligations prescribed in the relevant laws and administrative regulations.

 

Article 39 Where a contract is formed using standardized clauses, the party that provides the standardized clauses shall, adhering to the principle of fairness, define the rights and obligations of the parties and shall, in a reasonable manner, bring to the attention of the other party any clause that releases or limits such party's liability. Upon request by the other party, the party providing the standardized clauses shall give an explanation of such clauses.

A standardized clause is a clause that is drafted in advance by a party for repeated use and one that is not discussed with the other party at the time of the formation of the contract.

 

Article 40 A standardized clause is invalid if its contents fall under the provisions in Article 52 and Article 53 of this Law, or the party providing the standardized clause releases its own liabilities, increases the liabilities of the other party, or excludes a primary right of the other party.

 

Article 41 If a dispute arises over the understanding of a standardized clause, the interpretation rendered shall be pursuant to the common understanding of such clause. If two or more different interpretations of a standardized clause exist, the standardized clause shall be construed against the party that provides the standardized clause. If a standardized clause and a non-standardized clause are inconsistent, the non-standardized clause shall be used.

 

Article 42 If a party engages in any of the following during the course of the formation of a contract, thereby causing damages to the other party, such party shall be liable for damages:

(1) bad faith negotiations under the pretext of forming a contract;

(2) intentional concealment of important facts related to the formation of the contract or the provision of false information; or

(3) other acts that violate the principles of honesty and good faith.

 

Article 43 A trade secret that becomes known to a party during the course of the formation of a contract shall not be disclosed or improperly used whether or not the contract is concluded. If such trade secret is disclosed or improperly used, causing damages to the other party, the party that discloses or improperly uses the trade secret shall be liable for damages.

 

Chapter III  Contract Validity

Article 44 A contract that is lawfully concluded shall become effective at the time of its conclusion.

If the laws and administrative regulations provide that approval and registration procedures shall be carried out for a contract to become effective, such laws and regulations shall govern.

 

Article 45 The parties may agree that the validity of a contract be subject to certain conditions. A contract whose effectiveness is subject to certain conditions shall become effective upon the satisfaction of such conditions. A contract whose rescission is subject to certain conditions shall cease to be effective upon the satisfaction of such conditions.

If a party improperly prevents the satisfaction of a condition for its own benefit, the condition shall be deemed to have been satisfied. If a party improperly facilitates the satisfaction of a condition, the condition shall be deemed not to have been satisfied.

 

Article 46 The parties may agree on fixing a specific term for the validity of the contract. A contract that fixes a specific time for the contract to become effective shall become effective at such time. A contract that fixes a specific time for the termination of the contract shall cease to be effective at such time.

 

Article 47 A contract entered into by a person with a limited capacity for civil acts shall be valid upon ratification by his or her statutory representative. However, where the contract is purely for the procurement of benefit, or is formed in such a way as to correspond to the age, intellectual capacity or mental health status of such person, such contract need not be ratified by the statutory representative.

The opposite party may demand the statutory representative to ratify the contract within one month. The failure of the statutory representative to respond shall be deemed a refusal to ratify. Prior to the ratification of the contract, the opposite party in good faith shall have the right to rescind the contract. Such rescission shall be made by way of notice.

 

Article 48 If a person enters into a contract using the name of another, but the person performing such act lacks the authority to act as agent, or exceeds the scope of such authority, or such authority has terminated, such contract, in the absence of ratification by the person whose name is used, has no effect as to such person, and the person performing such act shall bear liability.

The opposite party may demand the person whose name is used to ratify the contract within one month. The failure of such person to respond shall be deemed a refusal to ratify. Prior to the ratification of the contract, the opposite party in good faith shall have the right to rescind the contract. Such rescission shall be made by way of notice.

 

Article 49 If a person enters into a contract using the name of another, but the person performing such act lacks the authority to act as agent, or exceeds the scope of such authority, or the agency has terminated, and the opposite party has grounds to believe that the agent has such agency rights, the act of agency shall be valid.

 

Article 50 If a legal representative or person in charge of a legal person or other organizations enters into a contract beyond the scope of his or her authority, the act of representation shall be valid unless the opposite party knows or should have known that the scope of authority has been exceeded.

 

Article 51 A contract under which a person without the right of disposition disposes of the property of another person shall be valid upon ratification by the person with such right or upon the acquisition of such right by the person without such right subsequent to the formation of the contract.

 

Article 52 A contract shall be void if:

(1) a party enters into a contract by fraudulent or coercive means, thereby impairing the interests of the State;

(2) there is a malicious collusion to impair the interests of the State, a collective or a third party;

(3) it conceals an illegal purpose by using legal means;

(4) it impairs social and public interests; or

(5) it violates a mandatory provision in the laws or administrative regulations.

 

Article 53 The following exculpatory clauses in a contract shall be invalid:

(1) one which results in bodily injury to the other party; and

(2) one which intentionally or through gross negligence results in the loss of, or damage to, property of the other party.

 

Article 54 A party shall have the right to petition the People's Court or an arbitration institution to alter or nullify a contract if:

(1) it is formed as a result of a major misunderstanding; or

(2) it is manifestly unfair at the time of the formation of the contract.

If a party by fraud or duress, or by taking advantage of the other party's plight causes the other party to enter into a contract under circumstances that are contrary to the true intent of such party, the injured party has the right to petition the People's Court or an arbitration institution to alter or nullify the contract.

If a party requests an alteration to the contract, the People's Court or the arbitration institution shall not nullify the contract.

 

Article 55 The right to nullify shall lapse under the following circumstances:

(1) a party with the right to nullify fails to exercise such right within one year from the date the party knows or should have known of the matter giving rise to the right to nullify; or

(2) a party with the right to nullify waives such right by clear expression or through its conduct, after knowing of the reason for the nullification.

 

Article 56 A contract that is invalid or nullified shall have no legally binding effect ab initio. If a contract is partially invalid and such partial invalidity does not affect the validity of the other parts of the contract, the other portions shall remain valid.

 

Article 57 The invalidity, nullification, or termination of a contract shall not affect the validity of any independently existing contractual provision related to the manner of dispute resolution.

 

Article 58 If a contract is invalid or is nullified, the property that was acquired as a result of such contract shall be returned. If it is impossible or unnecessary to return such property, monetary compensation shall be paid based on the value of the property. The party at fault shall compensate the other party for the damages incurred. If both parties are at fault, each party shall bear its respective liability.

 

Article 59 If property is acquired by way of a malicious collusion by the parties to impair the interests of the State, a collective or a third party, the property so acquired shall be recovered by the State or returned to the collective or third party.

 

Chapter IV  Contract Performance

Article 60 Each party shall fully perform its own obligations as agreed.

Each party shall observe the principles of honesty and good faith and perform the obligations of notification, assistance, confidentiality, etc. in accordance with the nature and purpose of the contract and customary business practice.

 

Article 61 After the contract becomes effective, in the absence of an agreement on such contents as quality, price or remuneration, place of performance, etc., or if the agreement on such contents is ambiguous, the parties may supplement such contents by agreement. In the event that a supplemental agreement cannot be reached, a determination shall be made according to the relevant provisions in the contract or the customary business practice.

 

Article 62 If certain contents agreed by the parties in the contract are ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the following provisions shall apply:

(1) If the quality requirements are ambiguous, performance shall be rendered in accordance with the national standard or industry standard; if neither a national standard nor an industry standard exists, performance shall be rendered in accordance with the customary standard or specific standard set in conformance with the purpose of the contract;

(2) If the price or remuneration is ambiguous, payment shall be made in accordance with the prevailing market price at the place of performance at the time the contract is formed; if the price is fixed or guided by the government, payment shall be made in accordance with the regulations thereof;

(3) If the place of performance is ambiguous, the place of performance shall be at the location of the recipient of the currency where currency is to be tendered; at the location of the real property where real property is to be delivered; and for other subject matter, at the location of the party who is to perform the obligation;

(4) If the time limit for performance is ambiguous, the obligor may perform at any time, and the obligee may also demand performance at any time, provided that necessary preparatory time is given to the other party;

(5) If the manner of performance is ambiguous, performance shall be rendered in a manner conducive to achieving the purpose of the contract; and

(6) If the responsibility for the cost of performance is ambiguous, such cost shall be borne by the party who performs the obligation.

 

Article 63 If a governmentally fixed or guided price is used, and the official price is adjusted during the specified term for delivery as provided in the contract, the price shall be the prevailing price at the time the goods are delivered. If delivery of the subject matter is delayed and the price rises, the original price shall be adopted; if the price falls, the new price shall be adopted. If a party takes delivery of the subject matter after the specified time limit, or payment is made after the due date and the price rises, the new price shall be adopted; if the price falls, the original price shall be adopted.

 

Article 64 If the parties agree that the obligor shall perform its obligations towards a third party, and the obligor fails to perform its obligations towards such third party or its performance of the obligations is not in conformance with the agreement, the obligor shall be liable to the obligee for breach.

 

Article 65 If the parties agree that a third party shall perform the obligations of the obligor towards the obligee, and the third party fails to perform the obligations of the obligor, or its performance of the obligations of the obligor is not in conformance with the agreement, the obligor shall be liable to the obligee for breach.

 

Article 66 If the parties have mutual obligations towards one another, and there is no order of priority with respect to the timing of the performance of such obligations, both parties shall perform such obligations concurrently. Each party has the right to reject any demand by the other party for performance prior to the performance by the other party. If the performance of a party's obligations fails to conform to the agreement, the other party has the right to reject such party's demand for corresponding performance.

 

Article 67 If an order of priority exists with respect to the timing of the performance of the mutual obligations between the parties, and the party who is to perform first fails to perform, the party who is to perform later has the right to reject the other party's demand for performance. If the performance of the obligations of the party who is to perform first is not in conformance with the agreement, the party who is to perform later has the right to reject the other party's demand for corresponding performance.

 

Article 68 The party who is to perform first may suspend its performance if it has clear evidence which shows that any of the following situations applies to the other party:

(1) a serious deterioration of the business condition;

(2) the transfer of its assets or withdrawal of its capital to evade its obligations;

(3) a loss of its business reputation; or

(4) other situations relating to the loss or possible loss of the obligor's ability to perform its obligations.

A party who suspends its performance without clear evidence in support thereof shall be liable for breach.

 

Article 69 A party who suspends performance pursuant to the provisions in Article 68 of this Law shall notify the other party in a timely manner. Performance shall resume when the other party provides an appropriate guaranty. After performance is suspended, if the other party fails to restore its ability to perform or provide an appropriate guaranty within a reasonable period, the party who suspends performance may rescind the contract.

 

Article 70 If the obligee is divided, merged, or has its address changed without notifying the obligor, thereby causing the obligor hardship in the performance of its obligations, the obligor may suspend its performance or escrow the subject matter.

 

Article 71 The obligee may reject the early performance of the obligor, unless such early performance does not impair the interests of the obligee.

The additional expenses incurred by the obligee due to the obligor's early performance of its obligations shall be borne by the obligor.

 

Article 72 The obligee may reject the obligor's partial performance of its obligations, unless such partial performance does not impair the interests of the obligee.

The additional expenses incurred by the obligee as a result of obligor's partial performance of its obligations shall be borne by the obligor.

 

Article 73 If the obligor is remiss in exercising its vested rights, thereby causing damages to the obligee, the obligee may petition the People's Court to grant the obligee the right to exercise, in its own name, the rights of the obligor by way of subrogation, unless such rights are the exclusive rights of the obligor.

The extent to which the subrogation rights can be exercised is limited to the rights of the obligee. The expenses necessary for the obligee to exercise such subrogation rights shall be borne by the obligor.

 

Article 74 If the obligor waives its vested rights or transfers assets gratuitously, thereby causing damages to the obligee, the obligee may petition the People's Court to nullify the acts of the obligor. If the obligor transfers any of its assets at a manifestly unreasonable low price, thereby causing damages to the obligee, and the transferee is aware of this situation, the obligee may also petition the People's Court to nullify the acts of the obligor.

The extent to which the right to nullify can be exercised is limited to the rights of the obligee. The expenses necessary for the obligee to exercise the right to nullify shall be borne by the obligor.

 

Article 75 The right to nullify shall be exercised within one year from the date the obligee knows or should have known of the matter for nullification. Such right to nullify shall lapse if the obligee fails to exercise such right within five years from the date of the occurrence of such act.

 

Article 76 Once a contract becomes effective, a party may not refuse to perform its contractual obligations due to a change in its name, or its legal representative, the person in charge or the person undertaking the performance of the contractual obligations.

 

Chapter V  Contract Amendments and Assignments

Article 77 Upon reaching a consensus through consultation, the parties may amend the contract.

If the laws and administrative regulations so provide, approval and registration procedures for such amendment shall be carried out in accordance with such laws and regulations.

 

Article 78 Where an agreement by the parties on the contents of an amendment is ambiguous, the contract shall be presumed as not having been amended.

 

Article 79 The obligee may assign the rights under a contract, in whole or in part, to a third party, except under the following circumstances:

(1) such rights may not be assigned based on the nature of the contract;

(2) such rights may not be assigned pursuant to the agreement of the parties; or

(3) such rights may not be assigned pursuant to the laws and regulations.

 

Article 80 In assigning its rights, the obligee shall notify the obligor. Without notice thereof, such assignment will have no effect on the obligor.

A notice by the obligee to assign its rights shall not be revoked, unless such revocation is consented to by the assignee.

 

Article 81 If the obligee assigns its rights, the assignee acquires the ancillary rights related to the rights of the obligee, unless such ancillary rights are the exclusive rights of the obligee.

 

Article 82 Upon receipt of the notice of assignment of rights, the obligor may assert against the assignee any defenses it has against the assignor.

 

Article 83 Upon receipt by the obligor of the notice of assignment of rights, the obligor shall have vested rights against the assignor, and if the rights of the obligor vest prior to or at the same time as the assigned rights, the obligor may claim an offset against the assignee.

 

Article 84 A delegation of the obligations under the contract, in whole or in part, by the obligor to a third party shall be subject to the consent of the obligee.

 

Article 85 If the obligor delegates its obligations, the new obligor may exercise any defense that the original obligor had against the obligee.

 

Article 86 If the obligor delegates its obligations, the new obligor shall assume the ancillary obligations related to the primary obligations of the obligor, unless such ancillary obligations are exclusive to the original obligor.

 

Article 87 If the laws and administrative regulations so provide, approval and registration procedures shall be carried out for the assignment of rights of the obligee and the delegation of obligations of the obligor in accordance with such laws and regulations.

 

Article 88 Upon the consent of the other party, a party may transfer its rights together with its obligations under a contract to a third party.

 

Article 89 Where the rights and obligations are transferred together, the provisions in Article 79, Articles 81 through 83, and Articles 85 through 87 of this Law shall apply.

 

Article 90 Where a party is merged after the contract has been formed, the legal person or other organization that survives the merger shall exercise the rights and perform the obligations under the contract. Unless otherwise agreed by the obligor and obligee, where a party is divided after the contract has been formed, the legal persons and other organizations that exist after the division shall jointly enjoy the rights and jointly assume the obligations under the contract.

 

Chapter VI  Termination of Contractual Rights and Obligations

Article 91 The rights and obligations under a contract shall terminate under any of the following circumstances:

(1) the obligations have been fully performed as agreed;

(2) the contract has been rescinded;

(3) the obligations have been mutually offset;

(4) the obligor has escrowed the subject matter in accordance with the law;

(5) the obligee has released the obligor of its obligations;

(6) the rights and obligations have vested in one party; or

(7) other circumstances for termination as set forth in the law or as agreed by the parties.

 

Article 92 After the termination of the rights and obligations under the contract, the parties shall observe the principles of honesty and good faith and perform the obligations of notification, cooperation, confidentiality, etc., in accordance with customary business practice.

 

Article 93 Upon reaching a consensus through consultation, the parties may rescind the contract.

The parties may agree upon condition(s) under which either party may rescind the contract. Upon the satisfaction of the condition(s), the party who has the right to rescind may rescind the contract.

 

Article 94 A party may rescind the contract under any of the following circumstances:

(1) the purpose of the contract is rendered impossible to achieve due to an event of force majeure;

(2) prior to the expiration of the period of performance, the other party expressly states, or indicates through its conduct, that it will not perform its principal obligation;

(3) the other party delays performance of its principal obligation after such performance has been demanded, and fails to perform within a reasonable period;

(4) the other party delays performance of its obligations, or breaches the contract in some other manner, rendering it impossible to achieve the purpose of the contract; or

(5) other circumstances as provided by law.

 

Article 95 If a party does not exercise the right to rescind prior to the end of the rescission period as prescribed by law or as agreed by the parties, such right shall lapse.

If the period to exercise the right to rescind is not prescribed by law or agreed by the parties, and such right is not exercised within a reasonable period after a demand for the exercise of such right is made on the other party, such right shall lapse.

 

Article 96 A party demanding rescission in accordance with Article 93, Section 2 and Article 94 of this Law shall notify the other party. The contract shall be rescinded upon receipt of the notice by the other party. If the other party objects to such rescission, it may petition the People's Court or an arbitration institution to adjudicate the validity of the rescission of the contract.

If the laws and administrative regulations so provide, the approval and registration procedures for the rescission of the contract shall be carried out in accordance with such laws and regulations.

 

Article 97 After the rescission of the contract, performance shall cease if the contract has not been performed; if the contract has been performed, a party may, in accordance with the circumstances of performance or the nature of the contract, demand the other party to restore such party to its original state or adopt other remedial measures, and such party shall have the right to demand compensation for damages.

 

Article 98 The termination of rights and obligations under a contract shall not affect the validity of clauses that relate to the final settlement of accounts and winding-up.

 

Article 99 If the parties are liable to one another for obligations that have became due, and if the type and nature of the subject matter of such obligations are the same, any party may offset its own obligations against the obligations of the other party, unless such offset is not allowed pursuant to the laws and regulations or cannot be made given the nature of the contract.

The party who claims such offset shall notify the other party. The notice shall be effective upon receipt by the other party. The offset shall not be subject to any condition or time limit.

 

Article 100 If the parties have obligations towards one another, and the type and nature of such obligations are different, the obligations may also be offset upon consensus between the parties after consultation.

 

Article 101 The obligor may escrow the subject matter under any of the following circumstances which render performance of the obligations difficult:

(1) the obligee refuses acceptance without a proper reason;

(2) the whereabouts of the obligee are unknown;

(3) the obligee is deceased and the successor has not been determined, or the obligee has lost civil capacity and a guardian has not been appointed; or

(4) other circumstances as provided for in the laws or regulations.

If the subject matter is not suitable for escrow or the cost of escrow is excessively high, the obligor may auction or sell the subject matter in accordance with the law, and escrow the proceeds therefrom.

 

Article 102 Unless the whereabouts of the obligee are unknown, the obligor shall notify the obligee, or the successor or guardian of the obligee immediately after the subject matter has been placed in escrow.

 

Article 103 After the subject matter has been placed in escrow, the risk of destruction, damage to, or loss of, the subject matter shall be borne by the obligee. The obligee shall be entitled to any fruits of the subject matter during the escrow period. Escrow costs shall be borne by the obligee.

 

Article 104 The obligee may reclaim the escrowed subject matter at any time, except that if the obligee has any outstanding obligations towards the obligor, the escrow institution shall, at the request of the obligor, refuse the obligee's claim of the escrowed subject matter prior to the obligee's performance of its obligations or the obligee's provision of security for its performance.

The right of the obligee to reclaim the escrowed subject matter shall lapse if such right is not exercised within five (5) years from the date the subject matter is placed in escrow, and the escrowed subject matter shall revert to the national treasury after the deduction of the escrow costs.

 

Article 105 If an obligee releases the obligor of its obligations, in whole or in part, the contractual rights and obligations related thereto shall terminate in whole or in part.

 

Article 106 If the rights and obligations vest in one person, such rights and obligations under the contract shall terminate, unless they involve the interests of a third party.

 

Chapter VII  Liability for Breach

Article 107 If one party fails to perform its contractual obligations, or the performance of its contractual obligations fails to conform to the agreement, such party shall continue its performance, take remedial measures or compensate the other party for damages, etc..

 

Article 108 If one party clearly expresses, or by its conduct clearly indicates, that it will not perform its contractual obligations, the other party may demand that it bear liability for breach of contract prior to the time such performance is due.

 

Article 109 If one party fails to pay the price or remuneration, the other party may demand that it pay such price or remuneration.

 

Article 110 If one party fails to perform a non-monetary obligation, or the performance of a non-monetary obligation fails to conform to the agreement, the other party may demand performance, except under the following circumstances:

(1) such performance cannot be rendered, in law or in fact;

(2) the object of the obligation is not suitable for specific performance, or the expenses for performance are excessively high; or

(3) the obligee fails to demand performance within a reasonable period.

 

Article 111 If the quality does not conform to the agreement, liability for breach should be borne in the manner agreed by the parties. In the absence of an agreement on liability for breach, or if the agreement on liability for breach is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the injured party may demand, by way of making a reasonable choice based on the nature of the object and the extent of the damages, the other party to repair, replace, re-make, return, or reduce the price or remuneration of the object, etc., as liability for breach of contract.

 

Article 112 If one party fails to perform its contractual obligations, or the performance of its contractual obligations fails to conform to the agreement, and the other party still suffers from other damages after the performance of the obligations or adoption of remedial measures, such party shall compensate the other party for such damages.

 

Article 113 If one party fails to performs its contractual obligations, or the performance of the contractual obligations fails to conform to the agreement, causing damages to the other party, the amount of compensation for damages shall be equal to the damages caused by the breach, including the benefit that could have been obtained had the contract been performed; however, the amount of compensation shall not exceed the damages for breach that were foreseeable or should have been foreseeable to the party in breach at the time the contract was formed.

If an operator of the business engages in a fraudulent act while providing goods or services to a consumer, the operator of a business shall bear liability for damages to the consumer pursuant to the provisions of the Law of the People's Republic of China on the Protection of the Rights and Interests of Consumers.

 

Article 114 The parties may agree that when a party breaches the agreement, it shall, based on the circumstances of the breach, pay the other party liquidated damages in a fixed amount, and may also agree on a method for calculating the amount of compensation for the damages incurred as a result of the breach.

If the amount of the agreed liquidated damages is lower than the damages incurred, a party may petition the People's Court or an arbitration institution to make an increase; if the agreed upon liquidated damages are significantly higher than the damages incurred, a party may petition the People's Court or an arbitration institution to make an appropriate reduction.

 

Article 115 The parties may, pursuant to the Guaranty Law of the People's Republic of China, agree that one party pay a deposit to the other party as a guaranty for the obligation. After the obligor has performed its obligation, the deposit shall be offset against the price or returned to the other party. If the party who pays the deposit fails to perform the agreed obligations, such party has no right to demand the return of the deposit. If the party who accepts the deposit fails to perform the agreed obligations, such party shall refund twice the value of the deposit.

 

Article 116 If the parties have agreed upon liquidated damages as well as a deposit, and one party is in breach, the other party may elect to apply either the provision for liquidated damages or the provision for the deposit.

 

Article 117 Unless otherwise provided by law, if the contract cannot be performed due to an event of force majeure, the responsibilities with respect to performance may be wholly or partially exempted, depending on the effect of the force majeure. If an event of force majeure occurs after a party has delayed its performance, such responsibilities cannot be exempted.

"Force majeure" as referred to in this Law means objective circumstances that cannot be foreseen, avoided or overcome.

 

Article 118 A party who cannot perform a contract due to an event of force majeure shall notify the other party in a timely manner in order to mitigate the damages that could be caused to the other party, and such party shall, within a reasonable period, provide the other party with evidence of such event of force majeure.

 

Article 119 After one party breaches a contract, the other party shall take appropriate measures to prevent the damages from increasing. If the other party's failure to take appropriate measures results in additional damages, it cannot demand compensation for the additional damages.

Reasonable costs paid by a party to prevent an increase in damages shall be borne by the party in breach.

 

Article 120 If both parties breach a contract, each party shall bear its own respective liability.

 

Article 121 If a party breaches a contract for reasons attributable to a third party, such party shall be liable to the other party for the breach. A dispute between a party and a third party shall be resolved as provided by law or in accordance with the agreement.

 

Article 122 If an act of breach by a party physically injures or impairs the property interests of the other party, the injured party has the right to choose to demand the other party to bear liability for the breach in accordance with this Law or to assume liability in tort in accordance with other laws.

 

Chapter VIII  Miscellaneous

Article 123 If other laws provide otherwise with respect to a contract, the provisions therein shall govern.

 

Article 124 The General Principles of this Law shall apply to contracts that are not expressly provided for in the Specific Provisions of this Law or in other laws; in addition, reference may be made to the provisions in the Specific Provisions or in other laws that most closely relate to such contracts.

 

Article 125 If a dispute arises between the parties over the interpretation of a provision in the contract, the true meaning of such provision shall be determined according to the terms and phrases used in the contract, the relevant provisions in the contract, the purpose of the contract, customary business practice and the principles of honesty and good faith.

If the contract is formed using two or more language versions, and it is agreed that such versions shall have equal validity, the terms and phrases used in the different versions are presumed to have the same meaning. If an inconsistency exists between the terms or phrases used in the different versions, an interpretation shall be rendered based upon the purpose of the contract.

 

Article 126 Unless otherwise provided for by law, the parties to a foreign-related contract may select the applicable law for the resolution of disputes under the contract. Where the parties to a foreign-related contract do not make such a selection, the laws of the country to which the contract has the closest contacts shall apply.

Sino-foreign equity joint venture contracts, Sino-foreign cooperative joint venture contracts and Sino-foreign cooperative contracts for the exploration of natural resources that are performed within the boundaries of the People's Republic of China shall be governed by the laws of the People's Republic of China.

 

Article 127 The industry and commerce administrative departments and other relevant administrative departments in charge shall, within the scope of their respective functions and powers and pursuant to the provisions of the laws and administrative regulations, be responsible for controlling and dealing with illegal activities with respect to contracts used to impair the interests of the State or the interests of the public and society; and if such activities constitute a crime, criminal liability shall be pursued in accordance with the law.

 

Article 128 The parties may resolve contractual disputes through reconciliation or mediation.

If the parties are unwilling to resolve a dispute through reconciliation or mediation, or if the reconciliation or mediation is unsuccessful, the parties may, on the basis of the arbitration agreement, apply to an arbitration institution for arbitration. The parties to a foreign-related contract may, on the basis of the arbitration agreement, apply to a Chinese arbitration institution or other arbitration institution for arbitration. If the parties have not entered into an agreement with respect to arbitration, or if the arbitration agreement is invalid, the parties may institute legal proceedings in the People's Court. The parties shall comply with any legally valid judgment, arbitration award or mediation agreement; if a party refuses to comply, the other party may petition the People's Court to enforce such judgment, arbitration award or mediation agreement.

 

Article 129 With respect to a dispute arising from a contract for the international sale of goods or a contract for the import and export of technology, the statute of limitations for instituting an action or applying for arbitration is four years from the date a party knows or should have known of the infringement on such party's rights. As to the statute of limitations for instituting an action or applying for arbitration with respect to a dispute arising from other contracts, the provisions of the relevant laws shall govern.

 

Chapter IX  Sales Contracts

Article 130 A sales contract is a contract under which the seller transfers the subject matter to the purchaser, and the purchaser pays the price to the seller.

 

Article 131 The contents of a sales contract may include, in addition to the provisions in Article 12 of this Law, the manner of packaging, the standard and method of inspection, the method for the settlement of accounts as well as the languages versions used and their validity.

 

Article 132 The subject matter for sale shall be owned by the seller, or the seller shall have the right to dispose of it.

If the transfer of the subject matter is prohibited or restricted by law or administrative regulation, the provisions therein shall govern.

 

Article 133 Unless otherwise prescribed by law or agreed by the parties, title of the subject matter shall pass upon delivery of the subject matter.

 

Article 134 The parties may agree in the sales contract that if the purchaser fails to make payment or to perform other obligations, title of the subject matter shall remain with the seller.

 

Article 135 The seller shall perform the obligations of delivering the subject matter or the documents for taking possession of the subject matter to the purchaser and of transferring title thereto.

 

Article 136 In addition to the documents for taking possession of the subject matter, the seller shall deliver to the purchaser the relevant documentation and materials in accordance with the agreement or customary business practice.

 

Article 137 Unless otherwise prescribed by law or agreed by the parties, where the subject matter sold involves intellectual property rights such as computer software, etc., such intellectual property rights related to the subject matter do not belong to the purchaser.

 

Article 138 The seller shall deliver the subject matter by the agreed time limit. If the time for delivery is agreed upon, the seller may deliver the subject matter at any time within the specified time period.

 

Article 139 If the parties fail to agree upon the time for delivery of the subject matter or the agreement on the time of delivery is ambiguous, the provisions in Article 61 and Article 62, Section 4 of this Law shall apply.

 

Article 140 If the subject matter is in the possession of the purchaser prior to the formation of the contract, the contract becomes effective at the time of delivery.

 

Article 141 The seller shall deliver the subject matter at the agreed place.

If the parties fail to agree upon a place of delivery or the agreement on the place of delivery is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the following provisions shall apply:

(1) If the subject matter needs to be transported, the seller shall deliver the subject matter to the first carrier for shipment to the purchaser;

(2) If the subject matter does not need to be transported, and both the seller and the purchaser were aware of the location of the subject matter at the time the contract was formed, the seller shall deliver the subject matter to such location; if the seller and purchaser were not aware of the location, the subject matter shall be delivered to the seller's place of business at the time the contract was formed.

 

Article 142 Unless otherwise prescribed by law or agreed by the parties, the risk of destruction, damage to, and loss of, the subject matter shall be borne by the seller prior to delivery of the subject matter, and borne by the purchaser after delivery of the subject matter.

 

Article 143 If for reasons attributable to the purchaser, the subject matter cannot be delivered by the agreed time, the purchaser shall bear the risk of destruction, damage to, or loss of, the subject matter from the date it breaches the agreement.

 

Article 144 Unless otherwise agreed by the parties, where the subject matter is sold by the seller who is to tender it to the carrier for transport, the risk of destruction, damage to, and loss of, the subject matter while in transit shall be borne by the purchaser from the time the contract is formed.

 

Article 145 If the parties fail to agree upon a place of delivery for the subject matter, or the agreement on the place of delivery is ambiguous, and the subject matter requires transportation pursuant to the provisions in Article 141, Section 2, Subsection 1 of this Law, the risk of destruction, damage to, or loss of, the subject matter after the seller delivers the subject matter to the first carrier shall be borne by the purchaser.

 

Article 146 If the seller places the subject matter at the place for delivery pursuant to the agreement or the provisions in Article 141, Section 2, Subsection 2 of this Law, and the purchaser, in breach of the agreement, fails to take delivery of the subject matter, the risk of destruction, damage to, or loss of, the subject matter shall be borne by the purchaser from the date the purchaser breaches the agreement.

 

Article 147 If the seller does not deliver the documentation and materials related to the subject matter as agreed, the passing of the risk of destruction, damage to, and loss of, the subject matter shall not be affected.

 

Article 148 If the quality of the subject matter fails to conform to the quality requirements, rendering it impossible to achieve the purpose of the contract, the purchaser may refuse to accept the subject matter or may rescind the contract. If the purchaser refuses to accept the subject matter or rescinds the contract, the risk of destruction, damage to, and loss of, the subject matter shall be borne by the seller.

 

Article 149 If the risk of destruction, damage to, and loss of, the subject matter is borne by the purchaser, the purchaser's right to demand the seller to bear liability for breach of contract due to the seller's failure to perform its obligations in conformance with the agreement shall not be affected.

 

Article 150 Unless otherwise prescribed by law, the seller shall have an obligation to warrant that no third party shall exercise against the purchaser any rights with respect to the delivered subject matter.

 

Article 151 If at the time of formation of the contract the purchaser knows or should have known that a third party has rights to the subject matter, the seller shall not assume the obligations prescribed under Article 150 of this Law.

 

Article 152 If the purchaser has clear evidence that a third party could assert a right to the subject matter, the purchaser may suspend the corresponding payment, unless the seller provides a proper guaranty.

 

Article 153 The seller shall deliver the subject matter in accordance with the agreed quality requirements. If the seller provides specifications regarding the quality of the subject matter, the delivered subject matter shall conform to the quality requirements therein.

 

Article 154 If the parties fail to agree upon the quality requirements, or the agreement on quality requirements is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the provisions in Article 62, Section 1 of this Law shall apply.

 

Article 155 If the subject matter delivered by the seller fails to conform to the quality requirements, the purchaser may demand the seller to bear liability for breach of contract pursuant to the provisions in Article 111 of this Law.

 

Article 156 The seller shall deliver subject matter in the manner of packaging as agreed. If a manner of packaging is not agreed, or the agreement on the manner of packaging is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the packaging shall be done in the customary manner, or in the absence of a customary manner, the manner of packaging adopted shall be adequate to protect the subject matter.

 

Article 157 Upon receipt of the subject matter, the purchaser shall inspect the subject matter during the agreed period for inspection. If a period for inspection is not agreed upon, inspection shall be conducted in a timely manner.

 

Article 158 If the parties have agreed upon a time period for inspection, the purchaser shall, during the inspection period, notify the seller of the circumstances under which the quantity or quality of the subject matter fails to conform to the agreement. If the purchaser is remiss in making such notification, the quantity or quality of the subject matter shall be deemed to be in conformance with the agreement.

If the parties have not agreed upon a period for inspection, the purchaser shall notify the seller within a reasonable period after the purchaser discovers or should have discovered that the quantity or quality is not in conformance with the agreement. If the purchaser fails to notify the seller within a reasonable period, or fails to notify the seller within two (2) years from the date of receipt of the subject matter, the quantity or quality of the subject matter shall be deemed to be in conformance with the agreement; however, if there is a quality warranty period for the subject matter, the quality warranty period shall apply and the provision regarding the two-year period shall not be applied.

If the seller knows or should have known that the subject matter provided does not conform to the agreement, the purchaser shall not be restricted by the notification period prescribed in the preceding two sections.

 

Article 159 The purchaser shall pay the price in the agreed amount. If a price is not the agreed upon, or the agreement on the price is ambiguous, the provisions in Article 61 and Article 62, Section 2 of this Law shall be applied.

 

Article 160 The purchaser shall make payment(s) at the agreed place. If the place of payment is not agreed upon, or the agreement on the place of payment is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the purchaser shall make payment(s) at the seller's place of business; however, if it is agreed that payment(s) of the price shall be conditioned upon the delivery of the subject matter or the delivery of documents for taking possession of the subject matter, payment(s) shall be made at the place where the subject matter or the documents for taking possession of the subject matter is to be tendered.

 

Article 161 The purchaser shall make payment at the agreed time. If the time of payment is not agreed upon, or the agreement on the time of payment is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the purchaser shall make payment at the time it receives the subject matter or the documents for taking possession of the subject matter.

 

Article 162 If the seller delivers the subject matter in excess quantity, the purchaser may accept or reject the excess portion. If the purchaser accepts the excess portion, the purchaser shall pay the price in accordance with the contract price; if the purchaser rejects the excess portion, the purchaser shall so notify the seller in a timely manner.

 

Article 163 Any fruits derived from the subject matter prior to delivery shall belong to the seller, and fruits derived after delivery shall belong to the purchaser.

 

Article 164 If the contract is rescinded because the principal part of the subject matter fails to conform to the agreement, the effect of the rescission of the contract shall extend to all ancillary parts of the subject matter. If the contract is rescinded because an ancillary part of the subject matter fails to conform to the agreement, the effect of such rescission shall not extend to the principal part of the subject matter.

 

Article 165 If the subject matter consists of several objects and only one of the objects fails to conform to the agreement, the purchaser may rescind the contract with respect to such object; however, if the severance of such object from the other objects manifestly impairs the value of the subject matter, either party may rescind the contract with respect to all objects.

 

Article 166 If the seller delivers the subject matter in installments, and the seller fails to deliver one installment of the subject matter or the delivery fails to conform to the agreement, rendering it impossible for such installment of subject matter to achieve the purpose of the contract, the purchaser may rescind the contract with respect to such installment of subject matter.

Where the seller delivers the subject matter in installments, if the seller fails to deliver one installment of the subject matter or the delivery fails to conform to the agreement, rendering it impossible for the subsequent delivery of other installments of the subject matter to achieve the purpose of the contract, the purchaser may rescind the contract with respect to such installment as well as other subsequent installments of the subject matter.

If the purchaser rescinds the contract with respect to one installment of the subject matter, and such installment and other installments of subject matter are interdependent, the purchaser may rescind the contract with respect to each of those installments of subject matter that has or has not been delivered.

 

Article 167 If the purchaser who makes payment by installment fails to make payment(s) equal to or exceeding one-fifth of the total price due, the seller may demand the purchaser to pay the price in full, or may rescind the contract.

If the seller rescinds the contact, the seller may demand the purchaser to pay a usage fee for the use of such subject matter.

 

Article 168 The parties who use a sample for a sales transaction shall seal up the sample, and specifications regarding the quality of the sample may be provided. The subject matter delivered by the seller shall have the same quality as that of the samples and that described in the quality specifications.

 

Article 169 If the purchaser who uses a sample for a purchase is unaware of a hidden defect in the sample, and even if the subject matter delivered is identical to the sample, the quality of the subject matter delivered by the seller shall nevertheless conform to the usual standards for the same type of object.

 

Article 170 The parties to a sale that includes a period for trial use may agree upon the period for trial use for the subject matter. If a period for trial period is not agreed upon, or the agreement on the period for trial use is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the period for trial use shall be determined by the seller.

 

Article 171 The purchaser in a sale that includes a period for trial use may purchase or refuse to purchase the subject matter during the period for trial use. If the purchaser fails to indicate whether or not it will purchase the subject matter prior to the expiration of the period for trial use, a purchase shall be deemed to have been effected.

 

Article 172 For a sale by bidding, the rights and obligations of the parties as well as the bidding procedures shall conform to the provisions of the relevant laws and administrative regulations.

 

Article 173 For a sale by auction, the rights and obligations of the parties as well as the auction procedures shall conform to the provisions of the relevant laws and administrative regulations.

 

Article 174 If there are provisions in the law for other non-gratuitous contracts, such provisions shall apply; in the absence of such provisions, reference shall be made to the relevant provisions in Sales Contracts.

 

Article 175 If the parties agree to a barter transaction under which the title of the subject matter is transferred, reference shall be made to the relevant provisions in Sales Contracts.

 

Chapter X  Contracts for the Supply of Electricity, Water, Gas and Heat

Article 176 An electricity supply contract is a contract under which the electricity supplier provides electricity to the electricity user, and the electricity user pays an electricity fee.

 

Article 177 The contents of an electricity supply contract shall include clauses relating to the manner, quality and time of the supply of electricity, the capacity, address and nature of electricity usage, method of measurement, methods of settlement for pricing and electricity fees, and the duties with respect to the maintenance of the facilities for the supply and use of electricity.

 

Article 178 The place of performance for the electricity supply contract shall conform to the agreement of the parties; if the parties have no such agreement, or the agreement is ambiguous, the place of performance shall be the place within which the property rights of the electricity supply facilities are demarcated.

 

Article 179 The electricity supplier shall supply electricity safely in accordance with quality standards for electricity supply as prescribed by the State and as agreed by the parties. If the electricity supplier fails to supply electricity safely in accordance with quality standards for electricity supply as prescribed by the State and as agreed by the parties, causing damages to the electricity user, the electricity supplier shall be liable for damages.

 

Article 180 If the electricity supplier needs to suspend electricity supply due to reasons such as a scheduled or necessary examination or repair of the electricity supply facilities, rationing of electricity in accordance with the law, or the illegal use of electricity by the electricity user, the electricity supplier shall notify the electricity user in advance pursuant to relevant State regulations. If the electricity supplier fails to notify the electricity user in advance of the suspension of electricity, resulting in losses or damages to the electricity user, the electricity supplier shall be liable for damages.

 

Article 181 If the electricity supply is suspended due to a natural disaster or other causes, the electricity supplier shall carry out repairs in a timely manner in accordance with relevant State provisions. If the failure to carry out emergency repairs in a timely manner results in losses or damages to the electricity user, the electricity supplier shall be liable for damages.

 

Article 182 The electricity user shall pay the electricity fee in accordance with relevant State regulations and the agreement of the parties. If the electricity user fails to pay the electricity fee within the specified time period, the electricity user shall pay the agreed late payment penalty. If the electricity user does not pay the electricity fee and late payment penalty within a reasonable period after having been demanded to do so, the electricity supplier may suspend electricity supply in accordance with the procedures prescribed y the State.

 

Article 183 The electricity user shall use the electricity supplied safely in accordance with relevant State regulations and the agreement of the parties. If the electricity user fails to use the electricity safely in accordance with relevant State regulations and the agreement of the parties, resulting in losses or damages to the electricity supplier, the electricity user shall be liable for damages.

 

Article 184 For contracts for the supply of water, gas and heat, reference shall be made to the relevant provisions for electricity supply contracts.

 

Chapter XI  Gift Contracts

Article 185 A gift contract is a contract under which a donor gives its own property to a donee gratuitously and the donee expresses its acceptance.

 

Article 186 The donor may revoke the gift prior to the passing of title of the gifted property.

The preceding section shall not apply to a gift contract that serves the public interest or is in the nature of a moral duty, such as disaster relief and aid to the poor, or for a gift contract that has been notarized.

 

Article 187 Where procedures such as registration are required for the property to be lawfully gifted, such procedures shall be undertaken.

 

Article 188 With respect to a gift contract that serves the public interest or is in the nature of an moral duty, such as disaster relief and aid to the poor, or a gift contract that has been notarized, if the donor fails to deliver the gifted property, the donee may demand delivery of such property.

 

Article 189 If damage, destruction or loss is caused to the gifted property due to the intentional act or gross negligence of the donor, the donor shall be liable for damages.

 

Article 190 A gift may be conditioned on an obligation.

Where the gift is conditioned on an obligation, the donee shall perform the obligation as agreed.

 

Article 191 If the gifted property has a defect, the donor shall not bear any liability with respect thereto. If the gift is conditioned on an obligation, and the gifted property has a defect, the donor shall, to the extent of such obligation, bear the same liability as would a seller.

If the donor intentionally fails to inform the donee of the defect, or warrants that the property has no defect, resulting in damages to the donee, the donor shall be liable for damages.

 

Article 192 The donor may revoke a gift if one of the following applies to the donee:

(1) the donee seriously injures or infringes upon the interests of the donor or a close relative of the donor;

(2) the donee has an obligation of support towards the donor and fails to perform such obligation; or

(3) the donee fails to perform its obligations as agreed in the gift contract.

The donor's right to revoke a gift shall be exercised within one year from the date the donor knows or should have known of the reason for the revocation.

 

Article 193 If an illegal act of the donee results in the death or loss of civil capacity of the donor, the successor or legal representative of the donor may revoke the gift.

The right of revocation of the successor or legal representative of the donor shall be exercised within six (6) months from the date the successor or legal representative of the donor knows or should have known of the reason for the revocation.

 

Article 194 The person who has the right to revoke a gift may demand the donee to return the gifted property.

 

Article 195 If the economic condition of the donor significantly deteriorates so as to severely affect the production and operations, or family life of the donor, the donor may discontinue performance of the gift obligation.

 

Chapter XII  Loan Contacts

Article 196 A loan contract is a contract under which the borrower borrows money from the lender and repays the borrowed money, together with interest, on the due date.

 

Article 197 Unless a loan is between natural persons and such natural persons agree otherwise, a loan contract shall be in writing.

The contents of a loan contract shall include clauses relating to the nature, currency, purpose, amount, rate of interest, term and manner of repayment of the loan.

 

Article 198 In forming a loan contract, the lender may demand the borrower to provide security. The security shall conform to the provisions of the Guaranty Law of the People's Republic of China.

 

Article 199 In forming a loan contract, the borrower shall, in accordance with the requirements of the lender, provide the true status of its business activities and financial condition related to the loan.

 

Article 200 The loan interest shall not be deducted from the principal in advance. If the interest has been deducted from the principal in advance, the loan shall be repaid and the interest shall be calculated in accordance with the actual amount of the loan.

 

Article 201 If the lender fails to extend the loan on the date and in the amount as agreed, causing losses to the borrower, the lender shall compensate the borrower for such losses.

If the borrower fails to collect the loan on the date and in the amount as agreed, the borrower shall pay interest on the date and in the amount as agreed.

 

Article 202 The lender may inspect and supervise the use of the loan as agreed. The borrower shall provide to the lender relevant materials such as financial and accounting statements on a regular basis as agreed.

 

Article 203 If the borrower fails to use the loan for the agreed upon purpose, the lender may cease disbursement of the loan, accelerate repayment of the loan or rescind the contract.

 

Article 204 The interest rate on a loan extended by a financial institution engaged in loan operations shall be set within the range for loan interest rates as prescribed by the People's Bank of China.

 

Article 205 The borrower shall pay interest within the agreed time period. If the term for the payment of interest is not agreed upon, or the agreement on the term for the payment of interest is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the interest shall be paid upon repayment of the loan if the loan term is less than one year; if the loan term exceeds one year, the interest shall be paid at the end of each one-year period of the loan during the loan term; and if there is a period remaining on loan term of less than one year, the interest shall be paid together with the repayment of the loan.

 

Article 206 The borrower shall repay the loan within the agreed time period. If the loan term is not agreed upon, or the agreement on the repayment of the loan is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the borrower may repay the loan at any time; the lender may demand that repayment by made within a reasonable period.

 

Article 207 If the borrower fails to repay the loan within the agreed time period, the borrower shall pay the default interest in accordance with the agreement or relevant State regulations.

 

Article 208 Unless otherwise agreed by the parties, if the borrower repays the loan in advance, the interest shall be calculated based on the actual period of the loan.

 

Article 209 Prior to the expiration of the term for repayment, the borrower may apply to the lender for an extension of the term for repayment. If the lender consents, the term may be extended.

 

Article 210 A loan contract between natural persons shall become effective at the time the lender provides the loan.

 

Article 211 If the payment of interest in a loan contract between natural persons is not agreed upon, or the agreement is ambiguous, the loan shall be deemed interest free.

If the payment of interest is agreed upon in the loan contract between natural persons, the interest rate for the loan shall not violate the relevant State regulations regarding the limitations on interest rates for loans.

 

Chapter XIII  Lease Contracts

Article 212 A lease contract is a contract under which the lessor delivers a leased object to the lessee for the lessee to use or to obtain benefit from, and the lessee pays rent therefor.

 

Article 213 The contents of a lease contract shall include clauses such as the name, quantity, purpose, lease term, rent, time and method of payment, and maintenance of the leased object, etc..

 

Article 214 The lease term shall not exceed twenty (20) years. Any part of the term exceeding twenty (20) years shall be invalid.

Upon expiration of the lease term, the parties may renew the lease contract, provided that the agreed lease term does not exceed twenty (20) years from the date of renewal.

 

Article 215 If the lease term is more than six (6) months, the lease contract shall be in written form. If the parties fail to adopt a written form, the lease shall be deemed as a lease of a non-fixed term.

 

Article 216 The lessor shall deliver the leased object to the lessee as agreed, and shall ensure that the use of the leased object during the lease term conforms to the agreed purpose.

 

Article 217 The lessee shall use the leased object in the agreed manner. If the manner of use is not agreed upon, or the agreement on the manner of use is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the leased object shall be used in accordance with the nature of the leased object.

 

Article 218 If the lessee uses the leased object in accordance with the agreed manner or consistent with the nature of the leased object, and such use results in wear and tear on the leased object, the lessee shall not be liable for damages.

 

Article 219 If the lessee fails to use the leased object in accordance with the agreed manner or uses the leased object in a manner inconsistent with the nature of the leased object, and such use results in damage to the leased object, the lessor may rescind the contract and demand compensation for damages.

 

Article 220 Unless otherwise agreed by the parties, the lessor shall perform maintenance obligations on the leased object.

 

Article 221 When the leased object requires maintenance, the lessee may demand the lessor to carry out such maintenance within a reasonable period. If the lessor fails to perform its maintenance obligations, the lessee may carry out such maintenance on its own, and the cost for such maintenance shall be borne by the lessor. If the maintenance on the leased object affects the lessee's use thereof, the rent shall be reduced accordingly or the lease term shall be extended.

 

Article 222 The lessee shall properly care for the leased object. If damage, destruction or loss is caused to the leased object due to improper safekeeping, the lessee shall be liable to compensate the lessor for damages.

 

Article 223 Subject to the consent of the lessor, the lessee may make improvements on, or additions to, the leased object.

If the lessee makes any improvement on, or additions to, the leased object without the lessor's consent, the lessor may demand the lessee to restore the leased object to its original condition or may demand compensation for damages.

 

Article 224 Subject to the consent of the lessor, the lessee may sublet the leased object to a third party. If the lessee sublets the leased object, the lease contract between the lessee and the lessor shall remain in effect. If the third party causes damage to the leased object, the lessee shall compensate the lessor for such damage.

If the lessee subleases the leased object without the consent of the lessor, the lessor may rescind the contract.

 

Article 225 Unless otherwise agreed by the parties, the lessee shall be entitled to the benefits obtained from the possession or use of the leased object during the lease term.

 

Article 226 The lessee shall pay the rent during the agreed upon time period. If the time period of payment is not agreed upon, or the agreement on the time period of payment of rent is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, payment shall be made at the expiration of the term of the lease, if the lease term is less than one year; if the lease term exceeds one year, payment shall be made at the end of each one-year period, and if there is a remaining period in the lease term of less than one year, payment shall be made upon the expiration of the lease term.

 

Article 227 If the lessee fails to pay or delays payment of the rent without a proper reason, the lessor may demand the lessee to make payment within a reasonable period. If the lessee fails to make payment within such reasonable period, the lessor may rescind the contract.

 

Article 228 If due to the assertion of a right by a third party the lessee is unable to make use of, or obtain benefit from, the leased object, the lessee may demand a reduction or waiver of the rent.

In the event of an assertion of a right by a third party, the lessee shall promptly notify the lessor.

 

Article 229 If a change in ownership of the leased object occurs during the lease term, the validity of the lease contract shall not be affected.

 

Article 230 In selling the leased premises, the lessor shall notify the lessee within a reasonable period prior to the sale, and the lessee shall have the right of first refusal to purchase such premises under equal conditions.

 

Article 231 If the leased object is damaged, destroyed, or lost, wholly or partially, due to causes not attributable to the lessee, the lessee may demand a reduction or waiver of the rent; if the leased object is damaged, destroyed or lost, wholly or partially, rendering it impossible to achieve the purpose of the contract, the lessee may rescind the contract.

 

Article 232 If the parties have not agreed upon a lease term, or the agreement on the lease term is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the lease shall be deemed to be a lease of a non-fixed term. The parties may rescind the contract at any time, provided that the lessor shall notify the lessee within a reasonable period prior to the lessor's rescission of the contract.

 

Article 233 If a leased object endangers the safety or health of the lessee, the lessee may rescind the contract at any time, even if the lessee was aware at the time of the formation of the contract that the quality of the leased object was not up to standard.

 

Article 234 If the lessee dies during the lease term, those persons who resided with lessee while the lessee was alive may lease the premises in accordance with the original lease contract.

 

Article 235 The lessee shall return the leased object upon the expiration of the lease term. The condition of the returned leased object shall conform to the condition agreed upon or shall be in a condition reflecting that the leased object has been used during the lease term in a manner consistent with the nature of the leased object.

 

Article 236 Upon the expiration of the lease term, if the lessee continues to use the leased object and the lessor does not object, the original lease contract shall remain in effect, but the lease term shall become non-fixed.

 

Chapter XIV  Finance Lease Contracts

Article 237 A finance lease contract is a contract under which the lessor purchases the leased object from the seller pursuant to the lessee's designation of the seller and the leased object, and provides the leased object to the leasee for its use thereof, and for which the lessee pays rent.

 

Article 238 The contents of a finance lease contract include the leased object's name, quantity, specifications, technical capability, method of inspection, lease term, particulars of rent, payment term and method of payment, currency and the passage of title of the leased object upon expiration of the lease term.

A finance lease contract shall be in written form.

 

Article 239 The seller shall deliver the leased object to the lessee as agreed in the sales contract entered into by the lessor pursuant to the lessee's designation of the seller and the subject matter, and the lessee shall have the rights of a purchaser with respect to the subject matter.

 

Article 240 The lessor, seller and lessee may agree that if the seller does not perform its obligations in the sales contract, the lessee may exercise the right to claim damages. Where the lessee exercises the right to claim damages, lessor shall provide assistance therewith.

 

Article 241 Absent the consent of the lessee, the lessor shall not alter any contents of the sales contract entered into by the lessor pursuant to the lessee's designation of the seller and subject matter that relate to the lessee.

 

Article 242 The lessor shall have ownership rights to the leased object. If the lessee becomes bankrupt, the leased object shall not be included in the assets of the bankrupt estate.

 

Article 243 Unless otherwise agreed by the parties, the rent in the finance lease contract shall be determined on the basis of the majority or entirety of the purchase cost of leased object and the reasonable profit of the lessor.

 

Article 244 Where the leased object does not meet the agreed standard or is not fit for its intended use, the lessor shall not bear any liability, unless the leasee relies on the skills of the lessor to select the leased object or the lessor interferes in the selection of the leased object.

 

Article 245 The lessor shall ensure the lessee's possession and use of the leased object.

 

Article 246 The lessor shall not be liable for bodily injury to, or property damage of, any third party caused by the leased object while the lessee is in possession of the leased object.

 

Article 247 The lessee shall properly safe-keep and use the leased object.

The lessee shall perform the obligations of maintenance on the leased object during the period it has possession of the leased object.

 

Article 248 The lessee shall pay rent as agreed. If the lessee fails to pay the rent within a reasonable period after a demand for payment, the lessor may demand payment of all rent, or the lessor may rescind the contract and repossess the leased object.

 

Article 249 Where the parties agree that title to the leased object shall vest in the lessee upon expiration of the lease term, and the lessee has paid most of the rent, but is incapable of paying the balance owed, resulting in the lessor's rescission of the contract and repossession of the leased object, the lessee may demand a partial refund where the value of the repossessed leased object exceeds the outstanding rent owed by the lessee and other expenses.

 

Article 250 The lessor and the lessee may agree upon the ownership of the leased object upon the expiration of the lease term. If the ownership of the leased object is not agreed upon, or the agreement is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, title to the leased object shall vest in the lessor.

 

Chapter XV  Special Undertaking Contracts

Article 251 A special undertaking contract is a contract under which the contractor completes certain work in accordance with the requirements of the principal and delivers the work achievements to the principal, and the principal pays a remuneration to the contractor.

Special undertakings include processing, work made to order, repairs, reproductions, tests, inspections, examinations, etc..

 

Article 252 The contents of a special undertaking contract include provisions regarding the subject matter, quantity, quality, remuneration, manner of the work to be undertaken, furnishing of materials, time period for performance, and the standard and method of the acceptance inspection.

 

Article 253 Unless otherwise agreed by the parties, the contractor shall complete the principal work with its own equipment, technology and labor.

If the contractor subcontracts a third party to complete the main work, the contractor shall be liable to the principal with respect to the work completed by the third party; if such work is subcontracted without the consent of the principal, the principal may rescind the contract.

 

Article 254 The contractor may subcontract a third party to complete the ancillary work of the special undertaking. If the contractor subcontracts a third party to do the ancillary work of the special undertaking, it shall be liable to the principal for the work achievements completed by the third party.

 

Article 255 If the contractor is to provide the materials, the contractor shall select the materials as agreed, and shall make available the materials for inspection and examination by the principal.

 

Article 256 If the principal is to provide materials, it shall provide the materials as agreed. The contractor shall inspect the materials provided by the principal in a timely manner, and upon discovering that any of the materials fail to conform to the agreement, the contractor shall, in a timely manner, send notice to the principal to replace or make up the deficiency in the materials, or take other remedial measures.

The contractor shall not replace any materials provided by the principal without authorization, nor shall it replace any parts or components that do not require repair.

 

Article 257 If the contractor discovers that the drawings or technical requirements provided by the principal are unrealistic, the contractor shall notify the principal in a timely manner. If the contractor incurs damages due to the principal's delay in responding, the principal shall compensate the contractor for such damages.

 

Article 258 If the principal changes the work requirements during the course of the work, thereby causing damages to the contractor, the principal shall compensate for such damages.

 

Article 259 If the work undertaken requires the assistance of the principal, the principal shall have an obligation to provide such assistance.

If the work cannot be accomplished due to the failure of the principal to fulfill such obligation of assistance, the contractor may demand the principal to perform such obligation within a reasonable period and may extend the time limit of performance. If the principal fails to perform such obligation within such period, the contractor may rescind the contract.

 

Article 260 During the course of the work, the contractor shall submit to the necessary supervision and inspection by the principal. The principal shall not hinder the normal operations of the contractor in its supervision and inspection of the work.

 

Article 261 Upon the completion of the work, the contractor shall deliver the completed work to the principal, along with the necessary technical materials and relevant quality certificates. The principal shall carry out an acceptance inspection on the work achievements.

 

Article 262 If the work achievements delivered by the contractor fail to conform to the quality requirements, the principal may demand that the contractor repair, re-do or re-make, accept a reduced remuneration or compensate for damages, etc., as liability for breach of contract.

 

Article 263 The principal shall pay remuneration to the contractor within the agreed time period. If the time of payment is not agreed upon, or the agreement is ambiguous and cannot be determined according to the provisions of Article 61 of this Law, the principal shall make the payment at the time of delivery of the completed work achievements; if the work is partially delivered, the principal shall make the corresponding payment.

 

Article 264 Unless otherwise agreed by the parties, if the principal fails to pay the contractor remuneration or the cost of materials, etc., the contractor shall have possessory lien rights to the completed work achievements.

 

Article 265 The contractor shall properly care for the materials provided by the principal, as well as the completed work achievements; if such materials are damaged, destroyed or lost due to improper care, the contractor shall bear liability for damages. 

 

Article 266 The contractor shall maintain confidentiality pursuant to the requirements of the principal, and shall not retain any reproduction of the contracted work or technical materials without permission from the principal.

 

Article 267 Unless otherwise agreed by the parties, joint-contractors for a special undertaking shall be jointly and severally liable to the principal.

 

Article 268 The principal may rescind the special undertaking contract at any time. If such rescission causes damages to the contractor, the principal shall compensate the contractor for such damages.

 

Chapter XVI  Construction Contracts

Article 269 A construction contract is a contract under which the contractor undertakes certain construction work and the party awarding the contract pays the contract price.

A construction contract includes contracts for surveying, designing, and construction.

 

Article 270 A construction contract shall be in written form.

 

Article 271 Activities related to the invitation and tendering of bids for a construction project shall be conducted publicly, fairly and impartially pursuant to the provisions of the relevant laws.

 

Article 272 The party awarding the contract may enter into one construction contract with a general contractor, or it may enter into separate surveying, design, and construction contracts with surveyors, designers, and constructors, respectively. The party awarding the contract shall not divide into parts a construction project that should be completed by one contractor and award the parts to various contractors.

Upon the consent of the party awarding the contract, the general contractor or the contractors for surveying, designing and construction may subcontract to a third party to complete a portion of the work for which it has been contracted. The third party, along with the general contractor or the contractors for surveying, designing and construction, shall be jointly and severally liable to the party awarding the contract with respect to the work achievements completed by the third party. The contractor shall not re-contract to a third party the entire construction project for which it has been contracted; nor shall it divide into parts the entire construction project for which it has been contracted and then, in the name of subcontracting, transfer all of the parts to a third party.

The contractor is prohibited from subcontracting a part of the construction project to any entity that does not possess the requisite qualifications. A subcontracted entity is prohibited from re-subcontracting the project that it has been contracted. The construction of the main structure of the construction project shall be completed by the contractor itself.

 

Article 273 Construction contracts for major State construction projects shall be formed in accordance with the procedures prescribed by the State as well as the investment plans and feasibility study reports, etc., approved by the State.

 

Article 274 The contents of contracts for surveying or design include provisions concerning the time limit for submission of the relevant basic materials and documentation (including an estimated budget), quality requirements, fees and other cooperative work conditions.

 

Article 275 The contents of a building contract include provisions regarding the scope of construction, construction period, schedule of the commencement and completion of the interim work required to be finished during the course of the project, quality of construction, costs for the construction of the project, time of delivery of the technical materials, responsibility for the supply of materials and equipment, appropriation of funds and settlement of accounts, acceptance inspection of the completed construction, scope of the quality warranty, warranty period, cooperation between both parties, etc..

 

Article 276 Where the construction project requires supervision, the party awarding the contract shall enter into a supervision contract in writing with a supervisor. The rights and obligations and legal responsibilities of the party awarding the contract and the supervisor shall be pursuant to the provisions in Agency Contracts in this Law, as well as those in other relevant laws and administrative regulations.

 

Article 277 The party awarding the contract may inspect at any time the progress and quality of the construction, provided that such inspection does not hinder the normal operations of the contractor.

 

Article 278 The contractor shall notify the party awarding the contract to carry out an inspection prior to the sealing of any construction work to be sealed. If the party awarding the contract fails to carry out the inspection in a timely manner, the contractor may extend the contract term and shall have right to demand compensation for damages for any work stoppages, work holdups, etc..

 

Article 279 After the construction work is completed, the party awarding the contract shall promptly carry out the acceptance inspection based on the construction drawings and specifications, as well as the regulations for acceptance inspection and quality inspection standards promulgated by the State. If the construction work passes the acceptance inspection, the party awarding the contract shall pay the agreed contract price and accept the construction project.

Once the completed construction project passes the acceptance inspection, it may be delivered for use; a construction project that is not inspected or one that fails to pass inspection shall not be delivered for use.

 

Article 280 If the party awarding the contract incurs any damages due to the failure of a survey or design to conform to the quality requirements, or due to the failure of the surveyor or designer to submit the survey or design documents within the time specified, the surveyor or designer shall continue improving the survey or design, reduce or waive the survey or design fee, and compensate the party awarding the contract for damages.

 

Article 281 If the quality of the construction project fails to conform to the agreement for reasons attributable to the constructor, the party awarding the contract shall be entitled to demand the constructor to repair, reconstruct or make changes to the construction project within a reasonable period free of charge. Where the delivery of the construction project is delayed due to such repair, reconstruction or changes, the contractor shall be liable for breach of contract.

 

Article 282 If for reasons attributable to the contractor, the construction project causes bodily injury or property damage during a reasonable period of use, the contractor shall be liable for damages.

 

Article 283 If the party awarding the contract fails to provide the contractor with raw materials, equipment, capital, technical information or a site pursuant to the time and requirements provided in the agreement, the contractor may extend the construction period and demand damages for any stoppage or holdup of work.

 

Article 284 If for reasons attributable to the party awarding the contract, a stoppage of, or suspension in, the construction of the project occurs, the party awarding the contract shall adopt measures to remedy or mitigate the losses, and shall compensate the contractor for losses and actual costs resulting from the stoppage, hold-up, returned shipment, reallocation or transfer of mechanical equipment, pile-up of materials and components, etc..

 

Article 285 If the party awarding the contract alters the plan, provides inaccurate data, or fails to provide necessary working conditions for a survey or design within the time specified, thereby causing the survey or design to be re-done, stopped or revised, the party awarding the contract shall pay any additional expenses incurred in accordance with the actual amount of work completed by the surveyor or designer.

 

Article 286 If the party awarding the contract fails to pay the price as agreed, the contractor may demand that the party awarding the contract pay the price within a reasonable period. If the party awarding the contract fails to make the payment within the time specified, the contractor may negotiate with the party awarding the contract to barter the construction work in lieu of payment or may petition the People's Court to auction the construction work in accordance with the law, unless the construction is not suitable for barter or auction given the nature of the construction. With respect to the use of proceeds from the barter or auction, priority shall be given to payment for the construction.

 

Article 287 Matters not provided for in this Chapter shall be governed by the relevant provisions in Special Undertaking Contracts.

 

Chapter XVII  Transportation Contracts

Part 1: General Provisions

Article 288 A transportation contract is a contract under which the carrier transports a passenger or goods from the point of departure to an agreed location, and the passenger, consignor or consignee pays a fare or freight charge.

 

Article 289 A carrier engaged in the business of public transportation shall not reject an ordinary or reasonable request for transport made by the passenger or consignor.

 

Article 290 The carrier shall safely transport the passenger or goods to the agreed location within the agreed time period or within a reasonable period.

 

Article 291 The carrier shall transport the passenger or goods to the agreed location using the agreed or usual route.

 

Article 292 The passenger, consignor or consignee shall pay a fare or freight charge. If the carrier fails to use the agreed or usual route resulting in an additional fare or freight charge, the passenger, consignor or consignee may refuse to pay the additional fare or freight charge.

 

Part 2: Passenger Transport Contracts

Article 293 Unless otherwise agreed by the parties or some other customary business practice exists, a passenger transport contract shall be formed upon the carrier's delivery of the passenger ticket to the passenger.

 

Article 294 The passenger shall board the carrier with a valid passenger ticket. If a passenger boards without a ticket, travels beyond the destination or above the class, or holds an invalid ticket, such passenger shall pay the required fare. The carrier may collect the additional fare in accordance with the relevant regulations. If the passenger fails to pay the fare, the carrier may refuse to transport such passenger.

 

Article 295 If for his own reasons the passenger is unable to board the carrier at the time specified on the passenger ticket, he shall within the agreed time limit go through procedures to return the ticket or change the ticket. Where the passenger fails to go through such procedures within the time limit, the carrier may refuse to refund the fare and shall no longer have an obligation to transport such passenger.

 

Article 296 During the course of transport, the carry-on luggage of the passenger shall not exceed the agreed quantity limit. Where the carry-on luggage exceeds the agreed quantity limit, the passenger shall complete the check-in procedures for the piece(s) of luggage that exceed the agreed quantity limit.

 

Article 297 The passenger shall not carry on his or her person or place in his or her luggage any hazardous goods such as inflammable, explosive, toxic, corrosive or radioactive goods; goods that could threaten the safety of persons or property on board, or any other contraband.

If the passenger violates the provisions of the preceding section, the carrier may unload or destroy the contraband, or turn it over to the relevant authorities. If the passenger insists on carrying the contraband on board or placing it in his or her luggage, the carrier shall refuse to transport the passenger.

 

Article 298 The carrier shall inform the passenger in a timely manner of important matters related to the inability to carry out normal transport and of precautions related to transportation safety.

 

Article 299 The carrier shall provide the passenger with transport service in accordance with the time and carrier number specified on the passenger ticket. Where the carrier delays transport service, the carrier shall, at the request of the passenger, make arrangements for the passenger to travel on another scheduled departure or refund the ticket price.

 

Article 300 Where the carrier lowers the service standards by changing the mode of transport without authorization, the carrier shall, at the request of the passenger, refund the ticket price or reduce the amount of the fare; where the carrier raises the service standard, the carrier shall not collect an additional fare.

 

Article 301 During the course of transport, the carrier shall use its best efforts to come to the aid of any passenger who is suffering from an acute illness, who is in labor or who is in danger.

 

Article 302 During the course of transport, the carrier shall be liable for damages for the death or bodily injury of a passenger, unless such death or bodily injury is attributable to passenger's own health condition or the carrier has evidence showing that such death or bodily injury is due to an intentional act or gross negligence of the passenger.

The provisions of the preceding section apply to passengers who, under the relevant regulations, are exempt from purchasing tickets, passengers who hold discount tickets and passengers who are permitted by the carrier to board without tickets.

 

Article 303 Where the carry-on articles of the passenger are damaged or destroyed during the course of transport due to the fault of the carrier, the carrier shall be liable for damages.

 

Where the checked-in luggage is destroyed, damaged or lost, the relevant regulations on transportation of goods shall govern.

 

Part 3: Contracts for the Transport of Goods

Article 304 When consigning goods for transport, the consignor shall accurately declare to the carrier the name of the consignee or the consignee on order, as well as other necessary information related to the transport of the goods, such as the name, nature, weight, quantity and destination of the goods.

Where the consignor's declaration is inaccurate or important information is omitted, causing losses to the carrier, the consignor shall bear liability for damages.

 

Article 305 Where approval or inspection formalities are required for the transport of the goods, the consignor shall submit to the carrier the documentation for which the relevant procedures have been completed.

 

Article 306 The consignor shall pack the goods in the agreed manner. In the absence of an agreement on the manner of packaging or if the agreement on the manner of packaging is ambiguous, the provisions of Article 156 of this Law shall apply.

If the consignor violates the provisions of the preceding section, the carrier may refuse to transport the goods.

 

Article 307 When consigning for transport hazardous goods such as combustible, explosive, toxic, erosive or radioactive goods, the consignor shall, in accordance with State regulations for the transport of hazardous goods, properly pack the hazardous goods, mark and label the goods as hazardous, and provide the carrier with the written materials with respect to the name, nature and safety precautions for such hazardous goods.

If the consignor violates the provisions of the preceding section, the carrier may refuse to transport such goods or may take appropriate measures to prevent the occurrence of loss; any expenses incurred therefrom shall be borne by the consignee.

 

Article 308 Prior to the carrier's delivery of the goods to the consignee, the consignor may request the carrier to suspend transport, return the goods, change the destination or deliver the goods to another consignee, provided that the consignor pays the carrier for any losses resulting therefrom.

 

Article 309 If the carrier knows who the consignee is, the carrier shall promptly notify the consignee once the goods arrive at the destination, and the consignee shall promptly take delivery of the goods. Where the consignee delays in taking delivery, it shall pay to the carrier a bailment fee and other expenses.

 

Article 310 The consignee shall inspect the goods within the agreed time period after taking delivery thereof. In the absence of an agreement as to the time limit for the inspection of goods, or if the agreement is ambiguous and cannot be determined pursuant to the provisions of Article 61 of this Law, the consignee shall inspect the goods within a reasonable period. If the consignee does not raise an objection with respect to the quantity of, or damage to, the goods within the agreed time limit or within a reasonable period, it shall be seen as prima facie evidence that the goods delivered by the carrier are in accordance with the terms on the transport documentation.

 

Article 311 The carrier shall be liable for damages for any destruction, damage to, or loss of, the goods incurred during the course of transport, unless the carrier proves that such destruction, damage to, or loss of, the goods was due to an event of force majeure, the nature of the goods, reasonable wear and tear, or the fault of the consignor or consignee.

 

Article 312 The amount of compensation for the damage to, or loss of, the goods shall be as agreed by the parties, if the parties have such an agreement; in the absence of an agreement or if the agreement on the amount of compensation is ambiguous and cannot be determined pursuant to the provisions of Article 61 of this Law, the amount of the compensation shall be calculated based upon the prevailing market price of the goods at the destination at the time the goods are delivered or should have been delivered. Where a law or administrative regulation provides otherwise with respect to the calculation method or limitation on the amount of compensation, such provisions shall govern.

 

Article 313 If the goods are transported by more than one carrier in the same mode of transport, the carrier who enters into contract with the consignor shall be responsible throughout the entire course of transport. If damage to the goods occurs at a particular segment of the transport, the carrier who enters into the contract with the consignor and the carrier for such segment shall bear joint and several liability.

 

Article 314 If the goods are destroyed or lost due to an event of force majeure occurring during the course of transport and the freight charge has not been collected, the carrier shall not demand payment thereof. If the freight charge has been collected, the consignor may claim a refund.

 

Article 315 Unless otherwise agreed by the parties, if the consignor or consignee fails to pay the freight charge, bailment fee or other expenses incurred in connection with the transport of the goods, the carrier shall be entitled to a possessory lien with respect to such goods.

 

Article 316 If the consignee is unknown or the consignee refuses to take delivery of the goods without a proper reason, the carrier may escrow the goods pursuant to the provisions of Article 101 of this Law.

 

Part 4: Multimodal Transport Contract

Article 317 The multimodal transport operator shall be responsible for the performance or coordination of the performance of a multimodal transport contract, and shall have the rights and assume obligations of a carrier for the entire course of transport. 

 

Article 318 The multimodal transport operator may agree with the individual carriers participating in each respective segment of the multimodal transport to share responsibilities within each respective segment of the multimodal transport. However, such agreement shall not affect the obligations of the multimodal transport operator for the entire course of transport.

 

Article 319 Upon receipt of goods delivered by the consignor, the multimodal transport operator shall issue a multimodal bill of lading. At the request of the consignor, the multimodal transport bill of lading may be transferable or not-transferable.

 

Article 320 If due to the fault of the consignor, the multimodal transport operator incurs damages while the goods are in transit, the consignor shall be liable for damages, even where the consignor has transferred the multimodal bill of lading.

 

Article 321 If destruction, damage to, or loss of, the goods occurs on a certain segment of the multimodal transport, liability for damages and the limits of liability of the multimodal transport operator shall be governed by the relevant laws regulating the mode of transportation in the segment under which the destruction, damage or loss occurred. If the transport segment on which the damage, destruction or loss occurred cannot be determined, liability for damages shall be borne in accordance with the provisions in this Chapter.

 

Chapter XVIII  Technology Contracts

Part 1: General Provisions

Article 322 A technology contract is a contract formed by the parties which defines the rights and obligations between one another with respect to technology development, transfer, consultation or services.

 

Article 323 The formation of a technology contract shall be conducive to the improvement of science and technology, and shall expedite the transformation, application and promotion of scientific and technological achievements.

 

Article 324 The contents of a technology contract shall be agreed by the parties. A technology contract generally contains the following provisions:

(1) name of the project;

(2) contents, scope and requirements of the subject matter;

(3) plan, progress schedule, time limit, place, area and manner with respect to performance;

(4) confidentiality of the technological information and material;

(5) assumption of risk liability;

(6) ownership of the technology achievements and the method of sharing the benefits derived therefrom;

(7) standard and method for inspection and acceptance;

(8) price, remuneration or license fee, and payment method;

(9) liquidated damages or the method of calculating damages for breach;

(10) method of dispute resolution; and

(11) definition of terms and terminology.

Pursuant to the agreement of the parties, technology background materials, feasibility studies and technology appraisal reports, documents regarding project tasks and scheduling, technology criterion, technological specifications, original design and technical documents, as well as other technical files relating to the performance of the contract may comprise parts of the contract.

If the technology contract involves a patent, it shall state the name of the invention, the applicant for the patent, the patentee, application date, application number, patent number and the valid term of the patent.

 

Article 325 The parties shall agree upon the manner of payment of the price, remuneration or license fee, which may be made through a single lump-sum payment based on lump-sum calculation; installment payments based on lump-sum calculation; or the parties may adopt a method of percentage payments, or percentage payments with an up-front fee.

If percentage payments are agreed upon, they may be made based on a fixed percentage of the price; the increased the value of the product, resulting from the implementation of the patent usage or technological secrets; profits or sales revenue of the product; or it may be calculated through other methods agreed by the parties. The percentage payment may be fixed, or it may be gradually increased or decreased on an annual basis.

If percentage payments are agreed upon, the parties shall agree upon a method for inspecting the relevant accounting books and records.

 

Article 326 If the right to use or transfer the technological achievements developed during the course of employment is owned by a legal person or other type of organization, the legal person or other type of organization may enter into a technology contract with respect to the technological achievements developed during the course of employment. The legal person or other type of organization shall grant as a reward or remuneration to the individual(s) who has accomplished the development of such technological achievements during the course of employment a fixed percentage of the benefits obtained from the use or transfer of such technology. Where the legal person or other type of organization forms a contract to transfer technological achievements developed during the course of employment, those persons who accomplish such technological achievements shall have the right of first refusal to acquire such technological achievements under equal terms and conditions.

Technological achievements developed during the course of employment means the technological achievements that are mainly developed in the course of carrying out the task of the legal person or other type of organization or developed under the material technological conditions of the legal person or other type of organization.

 

Article 327 An individual who develops technological achievements outside the course of employment is entitled to the right to use or transfer such technological achievements, and such individual may enter into technology contracts with respect to such technological achievements developed outside the course of employment.

 

Article 328 An individual who has developed technological achievements shall have the right to identify on the relevant documentation for the technological achievements that he or she is the person who has accomplished the technological achievements, and such person has the right to obtain a certificate of honor or a reward for such technological achievements.

 

Article 329 A technology contract that unlawfully monopolizes technology, impedes technological improvements or infringes upon another person's rights to technological achievements is invalid.

 

Part 2: Technology Development Contract

Article 330 A technology development contract is a contract formed by the parties with respect to research and development of a new technology, new product, new technique or new materials and their respective systems.

A technology development contract may be a commissioned development contract or a cooperative development contract.

A technology development contract shall be in written form.

With respect to a contract formed by the parties to carry out the transformation of the technological achievements that have industrial application value, reference shall be made to the provisions governing technology development contracts.

 

Article 331 The principal of a commissioned development contract shall pay the expenditures for the research and development work and remuneration; provide technical materials and original data; complete matters of cooperation; and accept the research and development achievements as agreed.

 

Article 332 The research and development party of a commissioned development contract shall formulate and implement the research and development plan, use the research and development funds in a reasonable manner, complete the research and development work as scheduled, deliver the research and development achievements; provide relevant technical information and necessary technical guidance, and assist the principal in mastering the research and development achievements as agreed.

 

Article 333 If the principal breaches the agreement leading to the cessation, delay or failure of the research and development work, the principal shall bear liability for breach.

 

Article 334 If the research and development party breaches the agreement causing the cessation, delay or failure of the research and development work, it shall bear liability for breach.

 

Article 335 The parties to a cooperative development contract shall make investments, including providing technology as a form of investment, as agreed; shall participate in the research and development work through the division of labor and shall cooperate and coordinate the research and development work.

 

Article 336 If a party to a cooperative development contract breaches the agreement causing the cessation, delay or failure of the research and development work, such party shall bear liability for breach.

 

Article 337 If the technology that is the subject of the technology development contract has been made public by a third party, rendering the performance of the technology development contract pointless, any party may rescind the contract.

 

Article 338 If insurmountable technical difficulties arise during the course of performance of a technology development contract, causing a total or partial failure of the research and development work, the liability for such risk shall be borne in the manner agreed by the parties. If no such agreement exists or the agreement on the allocation of risk is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, such risks shall be allocated by the parties in a reasonable manner.

If a party discovers that the research and development work may fail, in whole or in part, as a result of the provisions in the preceding section, the party shall promptly notify the other party and take appropriate measures to mitigate losses. If such party fails to promptly notify the other party and take appropriate measures, resulting in additional losses, such party shall be liable for the additional losses.

 

Article 339 Unless otherwise agreed by the parties, the research and development party shall be entitled to the right to apply for the patent of an invention or creation accomplished under the commissioned development. After such party has obtained the patent right, the principal may utilize such patented technology free of charge.

If the research and development party is to transfer its right to apply for a patent, the principal shall have the right of first refusal to assume such patent application right under equal terms and conditions.

 

Article 340 Unless otherwise agreed by the parties, the parties who cooperate in the joint development shall be entitled to the right to apply for a patent for an invention or creation accomplished under a cooperative development contract. If a party in the cooperative development is to transfer its jointly-owned right to apply for a patent, each of the other parties shall have the right of first refusal to obtain such right under equal terms and conditions.

If a party in the cooperative development declares a waiver of its jointly-owned patent application right, the other party may make an application for such patent right alone, or the other parties may make an application jointly. Once the applicant obtains the patent right, the party that has waived its right to apply for such patent may utilize such patent free of charge.

If one of the parties in the cooperative development does not agree to apply for a patent, none of the other parties may apply for a patent.

 

Article 341 The right to use, the right to transfer and the manner of benefit distribution of technological secrets developed under a commissioned development contract or a cooperative development contract shall be agreed by the parties. If no agreement exists or the agreement on such matters is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, all parties shall have the right to use or transfer the same; provided that the research and development party in a commissioned development shall not transfer the research and development achievements to a third party before it delivers such achievements to the principal.

 

Part 3: Technology Transfer Contracts

Article 342 A technology transfer contract includes contracts for the transfer of a patent right, transfer of the right to apply for a patent, transfer of technological secrets and patent licensing contracts.

Technology development contracts shall be in written form.

 

Article 343 The scope of the utilization of patented technology or the use of technological secrets between the transferor and the transferee may be agreed upon in a technology transfer contract; however, such contract shall not restrict competition in, or the development of, technology.

 

Article 344 A patent licensing contract shall only be valid during the valid term of the patent. After the expiration of the valid term of the patent right or if the patent right have been declared invalid, the patentee shall not enter into a patent licensing contract with any person with respect to such patent.

 

Article 345 The licensor in a patent licensing contract shall, in accordance with the agreed upon provisions, grant a license to the licensee to utilize the patented technology, deliver the relevant technical information for the utilization of the patented technology and provide necessary technical guidance.

 

Article 346 The licensee in a patent licensing contract shall utilize the patented technology in accordance with the agreement, shall not allow any third party that is not licensed in the agreement to utilize such patented technology, and shall pay the license fee in accordance with the agreement.

 

Article 347 The transferor in a contract for the transfer of technological secrets shall provide technical materials and conduct technical guidance, guarantee the practicality and reliability of the technology and assume the obligation of confidentiality in accordance with the agreement.

 

Article 348 The transferee in a contract for the transfer of technological secrets shall utilize the technology, pay the license fee and assume the obligation of confidentiality in accordance with the agreement.

 

Article 349 The transferor in a technology transfer contract shall warrant that it is the lawful owner of the technology provided, and that the technology provided is complete, free of errors, effective and able to accomplish the agreed objective.

 

Article 350 The transferee in a technology transfer contract shall undertake the obligation of confidentiality with respect to the secret parts of the technology provided by the transferor that have not been made public in accordance with the agreed upon scope and duration.

 

Article 351 If the transferor fails to transfer the relevant technology as agreed, it shall refund the license fee, in whole or in part, and shall be liable for breach; if the transferor's utilization of the patented technology or use of the technological secrets exceeds the agreed upon scope, or if the transferor breaches the contract by permitting without authorization a third party to utilize the patented technology or to use the technological secrets, the transferor shall cease the act of breach and assume liability for breach; if the transferor breaches its obligation of confidentiality, it shall be liable for breach.

 

Article 352 If the transferee fails to pay the license fee as agreed, the transferee shall pay the outstanding license fee as well as the agreed late payment penalty. If the transferee still fails to pay the outstanding license fee or pay the late payment penalty, it shall cease utilizing the patented technology or using the technological secrets, return the technical materials and assume liability for breach of contract. If the transferee's utilization of the patented technology or use of the technological secrets exceeds the agreed scope, or if the transferee permits a third party to utilize the patented technology or use the technological secrets without obtaining authorization from the transferor, the transferee shall cease such act of breach and shall assume liability for breach of contract. If the transferee breaches its obligation of confidentiality, its shall assume liability for breach of contract.

 

Article 353 Unless the parties agree otherwise, if the utilization of the patented technology or use of technological secrets by the transferee pursuant to the agreement infringes upon the lawful rights or interests of another person, the transferor shall bear liability.

 

Article 354 Based upon the principle of mutual benefit, the parties may provide in the technology transfer contract for the sharing of utilization or usage rights with respect to any subsequent improvement to the technological achievements of the patented technology or technological secrets. If no agreement on the sharing of the rights to such subsequent improvements exists or such agreement is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, no other parties shall have the right to share the technological achievements from any subsequent technical improvements made by a party.

 

Article 355 Where other laws or administrative regulations for technology import contracts, patents, or patent application contracts provide otherwise, such laws or administrative regulations shall govern.

 

Part 4: Technical Consulting Contracts and Technical Service Contracts

Article 356 Technical consulting contracts may include contracts that relate to the provision of feasibility studies, technical forecasts, technical investigations on a specific topic, analysis and evaluation reports with respect to a specific technical project.

A technical service contract means a contract under which one party uses its technical knowledge to solve a specific technical problem for another party. A technical service does not include construction contracts or special undertaking contracts.

 

Article 357 The principal in a technical consulting contract shall, in accordance with the agreement, clarify the issue(s) for consultation; provide technical background information and relevant technical materials and data; accept the work achievements of the commissioned party and pay the remuneration.

 

Article 358 The commissioned party in a technical consulting contract shall, within the agreed time limit, complete the consulting report or provide answers to problems; the consulting report provided shall meet the agreed upon requirements.

 

Article 359 If the principal in a technical consulting contract fails to provide the necessary materials and data as agreed, thereby affecting the progress and quality of the work, or does not accept or delays acceptance of the work achievements, it shall not demand a refund of the remuneration already paid and shall pay any remuneration due.

If the commissioned party in a technical consulting contract fails to provide its consultation report at the scheduled time, or the consultation report provided does not meet the agreed requirements, it shall reduce or waive its remuneration as a liability for breach of contract.

Unless otherwise agreed by the parties, if the commissioned party in a technical consulting contract provides a consultation report and opinions that meet the agreed requirements and the principal makes a decision based upon such reports and opinions that results in damages, such damages shall be borne by the principal.

 

Article 360 The principal in a technical service contract shall, in accordance with the agreed provisions, provide working conditions, complete matters of support, accept the work achievements and pay the remuneration.

 

Article 361 The commissioned party in a technical service contract shall, in accordance with the agreed provisions, complete the service work, solve technical problems, warrant the quality of the work, and impart know-how for solving technical problems.

 

Article 362 If the principal in a technical service contract fails to perform its obligations as agreed, or the performance of its obligation does not conform to the agreement, thereby affecting the progress and quality of the work; or if the principal does not accept or is remiss in accepting the work achievements, it shall not demand a refund of the remuneration already paid, and shall pay any remuneration due.

If the commissioned party in a technical service contract fails to complete the work as agreed in the contract, it shall waive its remuneration as a liability for breach of contract.

 

Article 363 The commissioned party shall be entitled to any new technological achievements developed by the commissioned party during the course of its performance of the technical consulting contract or technical service contract through its use of technical materials and working conditions provided by the principal. The principal shall be entitled to any new technological achievements developed by the principal by using the work achievements of the commissioned party. If the parties have otherwise agreed, such agreement shall apply.

 

Article 364 If the laws and administrative regulations have provisions for Technology Brokerage Contracts, Technology Training Contracts, such provisions shall govern.

 

Chapter XIX  Bailment Contracts

Article 365 A bailment contract is a contract under which the bailee safe-keeps an object delivered by the bailor and returns such object to the bailor.

 

Article 366 The bailor shall pay to the bailee the bailment fee as agreed.

If the parties have not agreed upon a bailment fee, or the agreement on the bailment fee is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the bailment shall be gratuitous.

 

Article 367 Unless otherwise agreed by the parties, the bailment contract is concluded at the time the object is delivered.

 

Article 368 Unless a customary business practice exists to the contrary, the bailee shall provide a bailment certificate when the bailor delivers the object to the bailee.

 

Article 369 The bailee shall properly safe-keep the object under bailment.

The parties may agree upon the location or method of the bailment. The location or method of bailment of the object shall not be changed without authorization, except in case of an emergency or for the protection of the interests of the bailor.

 

Article 370 If the object delivered to the bailee has a defect or requires special measures of care due to the nature of the object, the bailor shall inform the bailee of the relevant circumstances. If the bailor fails to so inform the bailee, resulting in damages to the object, the bailee shall not be liable for damages to the object; if the bailee incurs damages as a result, the bailor shall be liable for damages, unless the bailee knew or should have known that the object delivered had a defect or required special measures of care and failed to take remedial measures.

 

Article 371 Unless otherwise agreed by the parties, the bailee shall not turn the object over to a third party for bailment.

If the bailee turns over the object to a third party for bailment in violation of the provision in the preceding section, thereby causing damage to, or loss of, the object, the bailee shall be liable for damages.

 

Article 372 Unless otherwise agreed by the parties, the bailee shall not use or permit a third party to use the object.

 

Article 373 If a third party exercises a claim of right to the object, the bailee shall perform the obligation of returning the object to the bailor, unless the object is subject to preservation or specific performance pursuant to the law.

If the third party institutes an action against the bailee or applies for an attachment of the object, the bailee shall promptly notify the bailor.

 

Article 374 If the bailee improperly safe-keeps the object during the period of bailment, causing destruction, damage to, or loss of, the object, the bailee shall be liable for damages. However, if the bailment is gratuitous and the bailee proves that it was not grossly negligent, the bailee shall not be liable for damages.

 

Article 375 If the object for bailment is currency, negotiable securities or other valuable objects, the bailor shall make a declaration of such to the bailee, and the bailee shall carry out an acceptance inspection or seal up such object for bailment. If the bailor fails to make such declaration and the object is damaged, destroyed or lost, the bailee may compensate the bailor as if such object were an ordinary object.

 

Article 376 The bailor may retrieve the object at any time.

If the parties have not agreed upon the bailment period, or the agreement on the bailment period is ambiguous, the bailee may, at any time, demand the bailor to retrieve the object. If the bailment period has been agreed upon, the bailee shall not, in the absence of a special reason, demand the bailor to retrieve the object prior to the expiration of the period.

 

Article 377 Upon the expiration of the bailment period or upon the bailor's early retrieval of the bailed object, the bailee shall return to the bailor the original object and any fruits derived therefrom.

 

Article 378 If the object under bailment is currency, the bailee may return currency of the same type and amount. For other replaceable objects under bailment, the bailee may return objects of the same kind, quality and quantity as agreed.

 

Article 379 Under a bailment contract that is non-gratuitous, the bailor shall pay the bailment fee to the bailee within the agreed time.

If the parties have not agreed on the time of payment, or the agreement on the time of payment is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the fee shall be paid at the time the object is retrieved.

 

Article 380 Unless otherwise agreed by the parties, if the bailor fails to pay the bailment fee and other fees as agreed, the bailee shall have possessory lien rights to the object.

 

Chapter XX  Warehousing Contracts

Article 381 A warehousing contract is a contract under which a warehouseman stores goods delivered by the bailor and the bailor pays the warehousing fee.

 

Article 382 A warehousing contract shall become effective upon the conclusion of the contract.

 

Article 383 If perishable goods or hazardous goods such as combustible, explosive, poisonous, corrosive or radioactive goods are to be stored, the bailor shall specify the nature of such goods and provide relevant information.

If the bailor violates the provisions in the preceding section, the warehouseman may refuse to accept the goods for storage, or may take appropriate measures to prevent the occurrence of damage thereto, and the expenses incurred thereby shall be borne by the bailor.

If hazardous goods such as combustible, explosive, poisonous, corrosive or radioactive goods are to be stored, the warehouseman shall have the appropriate storage conditions for such goods.

 

Article 384 The warehouseman shall carry out an acceptance inspection on the goods to be stored in the warehouse as agreed. If during the course of the acceptance inspection, the warehouseman discovers that any of the goods does not conform to the agreement, it shall promptly notify the bailor of such non-conformity. After the acceptance inspection by the warehouseman, the warehouseman shall be liable for damages to the extent the type, quantity or quality of the goods fails to conform to the agreement.

 

Article 385 Upon the delivery of the goods by the bailor for storage, the warehouseman shall issue a warehouse receipt to the bailor.

 

Article 386 The warehouseman shall sign or affix a seal on the warehouse receipt. A warehouse receipt includes the following items:

(1) title or name and address of the bailor;

(2) type, quantity, quality, packaging, number of items and labeling of the goods;

(3) standard of wear and tear on the goods;

(4) location of storage;

(5) storage period;

(6) warehousing charge;

(7) policy amount, term of insurance and name of the insurer if insurance coverage has been obtained for the goods; and

(8) name of the issuer, place and date of issue of the warehouse receipt.

 

Article 387 The warehouse receipt is the voucher used to claim the stored goods. The bailor or the person in possession of the warehouse receipt may transfer the right to claim the goods if he or she has endorsed the warehouse receipt and the warehouseman has signed or affixed a seal thereon.

 

Article 388 The warehouseman shall, at the request of the bailor or person in possession of the warehouse receipt, consent to his or her inspection of the stored goods or his or her retrieval of the samples therefrom.

 

Article 389 If the warehouseman discovers any deterioration in, or other forms of damage to, the stored goods, it shall promptly notify the bailor or person in possession of the warehouse receipt.

 

Article 390 If the warehouseman discovers a deterioration in, or other forms of damages to, the stored goods, which endangers the safety or normal safekeeping of other stored goods, it shall demand the bailor or person in possession of the warehouse receipt to make the necessary disposal of the stored goods. In an emergency situation, the warehouseman may make the necessary disposal, provided that the bailor or person in possession of the warehouse receipt is notified of the situation promptly thereafter.

 

Article 391 If the parties have not agreed on the storage period or the agreement on the storage period is ambiguous, the bailor or person in possession of the warehouse receipt may retrieve the stored goods at any time. The warehouseman may, at any time, require the bailor or person in possession of warehouse receipt to retrieve the stored goods, provided that necessary preparatory time is given.

 

Article 392 Upon the expiration of the storage period, the bailor or person in possession of the warehouse receipt shall retrieve the stored goods with the warehouse receipt. If the bailor or person in possession of the warehouse receipt retrieves the stored goods after the expiration of the storage period, an additional warehousing fee shall be imposed. If the bailor or person in possession of the warehouse receipt retrieves the warehoused goods in advance, the warehousing fee shall not be reduced.

 

Article 393 If the bailor or person in possession of the warehouse receipt fails to retrieve the stored goods upon expiration of the storage period, the warehouseman may demand that the stored goods be retrieved within a reasonable period; if the stored goods are not retrieved after such reasonable period, the warehouseman may escrow the stored goods.

 

Article 394 During the storage period, if the stored goods are damaged, destroyed or lost due to the improper safekeeping of the warehouseman, the warehouseman shall be liable for damages.

If the deterioration in, or damage to, the stored goods is caused due to the nature of the goods, non-conformity with the agreed packaging or storage of the goods beyond the expiration of the effective storage period, the warehouseman shall not be liable for damages.

 

Article 395 Matters not covered by the provisions in this Chapter shall be governed by the relevant provisions in Bailment Contracts.

 

Chapter XXI  Agency Contracts

Article 396 An agency contract is a contract under which the agent handles matters for the principal as agreed by the principal and the agent.

 

Article 397 The principal may entrust an agent to handle one or several particular matters. The principal may also entrust an agent to handle all matters in general.

 

Article 398 The principal shall pay in advance the necessary expenses for handling the matters to be entrusted. The principal shall reimburse the agent for any necessary expenses advanced by the agent for handling the matters entrusted to it, as well as the interest thereon.

 

Article 399The agent shall handle the entrusted matters according to the instructions of the principal. Where a change to the principal's instructions is necessary, it shall be consented to by the principal. In an emergency situation in which contact with the principal is difficult, the agent shall handle the entrusted matters in a proper manner, and promptly thereafter shall notify the principal of the situation.

 

Article 400 The agent shall personally handle the matters entrusted to it. Upon consent of the principal, the agent may re-entrust the matter to another. After the re-entrustment is consented to, the principal may directly instruct the third person to whom such matters are re-entrusted, and the agent shall bear liability only with respect to the selection and appointment of the third person and its instructions given to the third person. Where the re-entrustment is not consented to, the agent shall bear liability for the acts of the third person, unless the agent needs to re-entrust such matters for the protection of the interests of principal due to an emergency.

 

Article 401 The agent shall report the status of the handling of the entrusted matter in accordance with the requirements of the principal. Upon the termination of the agency contract, the agent shall report to the principal on the outcome of the matters entrusted.

 

Article 402 Where the agent uses its own name to enter into a contract with a third party within the scope authorized by the principal, and the third party is aware, at the time of the formation of the contract, of the agency relationship between the agent and the principal, such contract shall bind directly the principal and the third party, unless clear evidence exists that proves that such contract binds only the agent and the third party.

 

Article 403 When the agent uses its own name to enter into a contract with a third party, and the third party has no knowledge of the agency relationship between the agent and the principal, and for reasons attributable to the third party, the agent fails to perform its obligations toward the principal, the agent shall disclose the third party to the principal, who may thereby exercise the rights of the agent against the third party, unless the third party would not have entered into the contract if it had knowledge of the principal at the time the contract was formed.

If for reasons attributable to the principal, the agent fails to perform its obligations toward the third party, the agent shall disclose the principal to the third party. The third party may thereby elect to assert its rights against the agent or the principal as the opposite party; however, the third party shall not change its selection of the opposite party.

If the principal exercises the rights of the agent against the third party, the third party may claim against the principal any defense that it has against the agent. If the third party selects the principal as the opposite party, the principal may claim against the third party any defense that it has against the agent, as well as any defense the agent has against the third party.

 

Article 404 Any property obtained from handling the matters entrusted by the agent shall be turned over to the principal.

 

Article 405 If the agent completes the entrusted matters, the principal shall pay remuneration to the agent. If for reasons not attributable to the agent, the agency contract is rescinded or the entrusted matters are unable to be completed, the principal shall pay the agent an appropriate remuneration. If the parties otherwise agree, such agreement shall apply.

 

Article 406 Under an agency contract that is non-gratuitous, the principal may demand compensation for damages caused by the fault of the agent. Under an agency contract that is gratuitous, the principal may demand compensation for damages caused by the intentional act or gross negligence of the agent.

The agent shall compensate the principal for any damages caused by acts beyond the scope of the agent's authority.

 

Article 407 If the agent sustains damages during the course of handling the entrusted matters due to reasons not attributable to itself, the agent may demand compensation from the principal for such damages.

 

Article 408 Upon consent of the agent, the principal may entrust a third party, in addition to the agent, to handle the entrusted matters. If as a result, damages are caused to the agent, the agent may demand the principal to compensate for such damages.

 

Article 409 Where two or more agents handle the same entrusted matter, the agents shall be jointly and severally liable toward the principal.

 

Article 410 The principal or the agent may rescind the agency contract at any time. Any damages caused to the other party as a result of the rescission of the agency contract shall be compensated, unless the reason for such rescission is not attributable to the rescinding party.

 

Article 411 Unless the parties have otherwise agreed, or the contract is not suitable for termination given the nature of the entrusted matter, the agency contract shall terminate upon the death, loss of the civil capacity or bankruptcy of the principal or the agent.

 

Article 412 If the termination of the agency contract due to the death, loss of civil capacity or bankruptcy of the principal would result in the impairment of the interests of the principal, the agent shall continue handling the entrusted matters until the successor or legal representative of the principal, or a liquidation organization undertakes the entrusted matter.

 

Article 413 If the death, loss of civil capacity or bankruptcy of the agent leads to the termination of the agency contract, the successor, legal representative or liquidation organization of the agent shall notify the principal in a timely manner. If the termination of the agency contract would impair the interests of the principal, the successor or legal representative of the agent, or a liquidation organization shall take any necessary measures prior to any subsequent arrangements made by the principal. 

 

Chapter XXII  Commission Agency Contracts

Article 414 A commission agency contract is a contract under which the commission agent uses its own name to engage in trade activities on behalf of the principal, and the principal pays a remuneration to the commission agent.

 

Article 415 Unless otherwise agreed by the parties, the expenses incurred by the commission agent engaged in handling the matters entrusted shall be borne by the commission agent.

 

Article 416 While the commission agent has possession of the entrusted object, it shall properly safe-keep such object.

 

Article 417 Where the entrusted goods are defective, perishable or susceptible to deterioration at the time of delivery to the commission agent, the commission agent may dispose of the goods upon the consent of the principal. If the commission agent is unable to contact the principal in a timely manner, the agent may dispose of the entrusted goods in a reasonable manner.

 

Article 418 The consent of the principal shall be obtained when selling goods at a price lower than the one designated by the principal, or when buying goods at a price higher than the one designated by the principal. If the principal does not consent, but the commission agent makes up for the price difference, the sale shall be deemed effective as to the principal.

If a commission agent sells goods at a price higher than the one designated by the principal or purchases goods at a price lower that the price designated by the principal, the remuneration of the commission agent may be increased as agreed. Where an increase in remuneration is not agreed or the agreement on the increase in remuneration is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the principal shall be entitled to such benefit.

If the principal has given specific instructions as to the price of the goods, the commission agent shall not purchase or sell goods in violation of such instructions.

 

Article 419 Unless the principal expresses to the contrary, the commission agent itself may act as the purchaser or seller of goods in purchasing or selling goods with a fixed market price.

If the situation described in the preceding section applies to the commission agent, it may still demand the principal to pay remuneration.

 

Article 420 When the commission agent purchases goods as agreed, the principal shall accept the entrusted goods in a timely manner. If after a demand by the commission agent, the principal refuses to accept the goods without proper reason, the commission agent may escrow the entrusted goods pursuant to the provisions in Article 101 of this Law.

If the goods cannot be sold or the principal revokes the sale, and the principal fails to either retrieve or dispose of such goods after a demand by the commission agent, the commission agent may escrow the entrusted goods pursuant to the provisions in Article 101 of this Law.

 

Article 421 If a commission agent enters into a contract with a third party, the commission agent shall directly assume the rights and obligations in such contract.

Unless otherwise agreed by the commission agent and principal, if the third party fails to perform its obligations, resulting in damages to the principal, the agent shall be liable for damages.

 

Article 422 After the commission agent has completed the entrusted matter, in whole or in part, the principal shall pay the commensurate remuneration to the commission agent. Unless otherwise agreed by the parties, if the principal fails to pay the remuneration on time, the commission agent shall have possessory lien rights to the entrusted goods.

 

Article 423 Matters not covered by the provisions in this Chapter shall be governed by the relevant provisions in Agency Contracts.

 

Chapter XXIII  Brokerage Contracts

Article 424 A brokerage contract is a contract under which the broker informs the principal of an opportunity to form a contract, or provides the principal with brokerage services for the formation of a contract, and the principal pays the remuneration.

 

Article 425 The broker shall provide the principal with truthful information with respect to matters related to the formation of the contract.

If the broker intentionally conceals important facts related to the formation of a contract or provides false information, thereby impairing the interests of the principal, the broker shall not demand that remuneration be paid and shall be liable for damages.

 

Article 426 If the broker facilitates the conclusion of a contract, the principal shall pay the remuneration as agreed. If the remuneration for the broker is not agreed, or the agreement on remuneration is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, it shall be determined reasonably based on the labor or work of the broker. If the broker provides brokerage services for the formation of such contract, and such services facilitate the conclusion of the contract, the remuneration to the broker shall be borne equally by the parties to the contract.

When the broker facilitates the conclusion of a contract, the expenses for the brokerage activities shall be borne by the broker.

 

Article 427 If the broker fails to facilitate the conclusion of the contract, the broker shall not demand payment of remuneration; however, it may demand the principal to pay the expenses necessary for the brokerage activities.

 

Supplementary  Provisions

Article 428 This Law shall take effect on October 1, 1999. At such time, the Law of the People's Republic of China on Economic Contracts, the Law of the People's Republic of China on Economic Contracts involving Foreign Interests and the Law of the People's Republic of China on Technology Contracts shall be repealed.

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