Economic Contract Law of the People’s Republic of China
Chapter Ⅰ General Provisions
Article 1 This Law is formulated with a view to safeguarding the sound development of the socialist market economy, protecting the lawful rights and interests of the parties to economic contracts, maintaining the socio-economic order and promoting the progress of the socialist modernization drive.
Article 2 This Law shall be applicable to contracts entered into between civil subjects of equal footing, that is, between legal persons or other economic organizations or self-employed industrial and commercial households or leaseholding farm households for the purpose of realizing certain economic goals and defining the rights and obligations of the parties.
Article 3 Economic contracts, except for those in which accounts are settled immediately, shall be in written form. Documents, telegrams and charts that relate to the modification of a contract and that are agreed upon by the parties through consultation shall also be integral parts of the contract.
Article 4 In concluding an economic contract, the parties must comply with the laws, administrative rules and regulations. No unit or individual may make use of a contract to engage in illegal activities, disrupt the socio-economic order, damage the interests of the State or the public interest, and seek illegal incomes.
Article 5 In concluding an economic contract, the parties must follow the principles of equality and mutual benefit and agreement through consultation. No party may impose its own will on the other party, and no unit or individual may illegally interfere.
Article 6 As soon as an economic contract is established in accordance with the law, it shall have legally binding force, and the parties must fully perform their obligations as stipulated in the contract. Neither party may unilaterally modify or rescind the contract.
Article 7 The following economic contracts shall be void:
(1) contracts violating the law, administrative rules and regulations;
(2) contracts signed through the use of fraud, coercion or similar means;
(3) contracts signed by an agent beyond the scope of his power of agency, or contracts signed by an agent in the name of his principal with himself or with another person whom he represents; and
(4) economic contracts violating the interests of the State or the public interest.
Economic contracts that are void from the time they are concluded shall have no legally binding force. If a part of an economic contract is confirmed to be void, without affecting the validity of the remainder, the remainder shall still be valid.
The voidness of an economic contract shall be confirmed by the people’s courts or the arbitration agencies.
Article 8 The provisions of this Law shall, except as otherwise provided in the laws, apply to all contracts for purchase and sale, construction projects, processing transportation of goods, supply and use of electricity, warehousing, lease of property, loans and property insurance and other economic contracts.
Chapter Ⅱ The Conclusion and Performanceof Economic Contracts
Article 9 An economic contract is established once both parties have, in accordance with the law, reached agreement through consultation on the principal clauses of the contract.
Article 10 hen an economic contract is to be concluded through an agent, the agent must first obtain a proxy in writing from the principal and sign the contract in the name of the principal within the scope of his power of agency, before the contract directly gives rise to rights and obligations on the part of the principal.
Article 11 In case the State issues a mandatory plan to enterprises according to needs, relevant enterprises shall conclude contracts between them in accordance with their rights and duties as stipulated by laws and administrative rules and regulations.
Article 12 An economic contract shall contain the following principal clauses:
(1) the object ( referring to goods, labour services, construction projects, ect. ) ;
(2) the quantity and quality;
(3) the price or remuneration;
(4) the time limit, place and method of performance; and
(5) the liability for breach of contract.
An economic contract shall also include as its principal clauses those whose inclusion is stipulated by law or by virtue of the nature of the economic contract, or whose inclusion is considered as indispensable by either party to the contract.
Article 13 Where the obligations under an economic contract are to be fulfilled in monetary terms, except as otherwise provided by laws or administrative rules and regulations, Renminbi must be used for computation and payment.
Except for cases in which the State permits the use of cash to fulfil obligations, settlements must be made by means of transfer of bank accounts or bills.
Article 14 One party may pay a deposit to the other party. After the economic contract is performed, the deposit shall be returned or set off against the price.
If the party that pays the deposit fails to perform the contract, it shall have no right to reclaim the deposit. If the party that receives the deposit fails to perform the contract, it shall return twice the amount of the deposit.
Article 15 If one party to an economic contract requests a guaranty, such guaranty may be provided by a guarantor. Where the guaranteed party fails to perform the contract, the guarantor shall perform or be held with joint obligation in accordance with the agreement on the guaranty.