Features of the new Contract Law
of the People's Republic of China

By Wang Xuanjun

TO MEET THE REQUIREMENT of a market-oriented economy of the People's Republic of China (PRC), "Contract Law of PRC" ("new Contract Law") was just adopted on March 15, 1999 at the 2nd Session of the 9th National People's Congress and will take effect on October 1, 1999, which will replace the following 3 contract laws ("3 Contract Laws") currently in effect:

  • "Law of PRC on Economic Contracts" adopted on December 13, 1981 and applied to economic contracts concluded between or among domestic legal persons, other economic organizations, individual businesses, or leaseholding rural households.

  • "Law of PRC on Economic Contacts involving Foreign Interests" adopted on March 21, 1985 and applied to the economic contracts (excluding international transport contracts) concluded between enterprises or other economic organizations of PRC and foreign enterprises, other economic organizations or individuals.

  • "Law of PRC on Technology Contracts" adopted on June 23, 1987 and applied to the technology contracts concluded between or among domestic legal persons or individuals.

  • The main features of new Contract Law as a united contract law are:

    1. The new Contract Law is one of longest laws of PRC in respect of the number of its articles totaling 428 articles included in 3 component parts of General Provisions, Subprovisions and Supplementary Provisions. Subprovisions are specially arranged as one part in the new Contract Law to have the exact contract disputes settled successfully.

    2. Comparing to 3 Contract Laws apparently characterized by planed economy, the new Contract Law is characterized by market-oriented economy by which provisions governmental interventions shall be restricted and more freedom shall be given to the parties to contracts.

    3. The new Contract Law is the first basic national law completely drafted by legal experts and scholars from prestigious educational and research institutions of law. By which we may understand that academic opinions, though with inevitable lacunas, are becoming to be valued.

    4. The parties to a contact are pluralized. The new Contract Law is applied to the contracts (contracts related to relation of identity excluded) concluded between or among equal parties of natural persons, legal persons or other economic organizations. The concept of natural person as a party is introduced to the new Contract Law, which enlarges its scope of application. Therefore, a citizen may maintain his/her lawful rights and interests in accordance with the specific provisions by the new Contract Law in the daily activities of either purchasing house, effecting insurance, eating, or employment of baby-sitter.

    5. The form of a contract may be appeared in more flexible ways. Oral form in addition to written form and others are still adopted to be used in accordance with the provisions of Article 10 of new Contract Law to keep abreast of promote transaction. Meantime the new Contract Law is shown modern thanks to that many possible specific written forms at present are listed as written contract, letter, cable, telex, facsimile, electronic data interchange, electronic mail according to the provisions of Article 11 of new Contract Law.

    6. Officially specified in new Contract Law are some new kinds of contract in PRC as contract for financial leasing, of mandate, of commission agency and of brokerage which all appeared in recent years in the economic activities of PRC.

    7. Also specified are more provisions as "offer" and "acceptance" as to concluding a contract, "establishment and execution of a contract" regarding the validity of a contract, new system of "right of pleadings, subrogation, rescission" concerning the performance of a contract. The new Contract Law with the further provisions is more accurate and perfect than 3 Contract Laws.

    We have reasons to believe that the new Contract Law will produce significant effect in the future economic activities of enterprises, other economic organizations or individuals both in the PRC and abroad. It is necessary for foreigners, who have economic relations with PRC, to get the knowledge of the new Contract Law.

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    Text and Photo 1999, Wang Xuanjun
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