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

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

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

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

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

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

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

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

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

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

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

1999] PRC CODE OF CONTRACT LAI 213 abuse of judicial power became an inevitable by-product of such an insufficient system.The NPC passed the Code in order to address the foregoing issues and to create an ideal and uniform mechanism of contract law in mainland China. The Code of Contract Law consists of 428 articles in total,making it the second largest statute in China after the Code of Criminal Law of 1997,which consists of 452 articles.The Code of Contract Law is meant to cover all issues of contract law and,in particular,abolishes the distinction between the foreign related contract and the domestic contract.This feature is very important to foreign companies and businesspersons,including those from Hong Kong,Macau,and Tai- wan,who are equally subject to the Foreign Economic Contract Law. The Code of Contract Law can be broadly divided into two parts: the General Principles and the Specific Rules.The first part contains eight chapters,setting out the general principles of contract law in the PRC.The second part consists of fifteen chapters,which repre- sent the "branches"or "limbs"of the contract law and includes pro- visions to regulate contracts for the sale of goods,"including but not limited to the following:contracts for supply and use of electricity, water,gas,or heating donations;loansleases:construction 7.CODE OF CRIMINAL LAW (P.R.C.).translated in Charles D.Paglee,China law Web-PRC Criminal Law (last modified Apr.7.1998)[hereinafter C.CRIM.L.]. 8.See C.CONT.L.,supra note 2,art.428 (announcing that on the date the Code of Contract Law of the PRC came into effect,both the prior domestic and foreign economic contract laws were rendered invalid and superseded). 9.See id.arts.130-75(defining the scope of the regulation and setting forth provisions regulating the sale of goods). 10.See id.arts.176-84(setting forth contractual obligations). 11.See id.arts.185-95(regulating contracts where one party has made a gift, for no consideration to the other party (the donee)who accepts the gift). 12.See id.arts.196-211 (defining a loan contract and setting forth the obliga- tions of the parties to such a contract). 13.See C.CoNT.L.,supra note 2,arts.212-36 (setting forth the law pertaining to contracts for leases). 14.See id.arts.251-68(regulating work contracts for services performed)

PRC CODE OF CONTRACTLA W abuse of judicial power became an inevitable by-product of such an insufficient system. The NPC passed the Code in order to address the foregoing issues and to create an ideal and uniform mechanism of contract law in mainland China. The Code of Contract Law consists of 428 articles in total, making it the second largest statute in China after the Code of Criminal Law' of 1997, which consists of 452 articles. The Code of Contract Law is meant to cover all issues of contract law and, in particular, abolishes the distinction between the foreign related contract and the domestic contract.8 This feature is very important to foreign companies and businesspersons, including those from Hong Kong, Macau, and Tai￾wan, who are equally subject to the Foreign Economic Contract Law. The Code of Contract Law can be broadly divided into two parts: the General Principles and the Specific Rules. The first part contains eight chapters, setting out the general principles of contract law in the PRC. The second part consists of fifteen chapters, which repre￾sent the "branches" or "limbs" of the contract law and includes pro￾visions to regulate contracts for the sale of goods," including but not limited to the following: contracts for supply and use of electricity, water, gas, or heating;0 donations;" loans;' leases;" construction;'" 7. CODE OF CRIMINAL LAW (P.R.C.), translated in Charles D. Paglee, China law Web- PRC Criminal Law (last modified Apr. 7, 1998) [hereinafter C. CRIM. L.]. 8. See C. CONT. L., supra note 2, art. 428 (announcing that on the date the Code of Contract Law of the PRC came into effect, both the prior domestic and foreign economic contract laws were rendered invalid and superseded). 9. See id. arts. 130-75 (defining the scope of the regulation and setting forth provisions regulating the sale of goods). 10. See id. arts. 176-84 (setting forth contractual obligations). 11. See id. arts. 185-95 (regulating contracts where one party has made a gift, for no consideration to the other party (the donee) who accepts the gift). 12. See id. arts. 196-211 (defining a loan contract and setting forth the obliga￾tions of the parties to such a contract). 13. See C. CONT. L., supra note 2, arts. 212-36 (setting forth the law pertaining to contracts for leases). 14. See id. arts. 251-68 (regulating work contracts for services performed). 1999]

214 AM.U.INT'L L.REV. [15:209 the performance of specific works;transportation;technology: storage;"warehousing:commission;brokerage;"and intermedia- 9 2 tion. The categories of specific contracts listed in the Code reflect Chi- nese perceptions of contracts and contractual relationships in com- mercial transactions.These categories differ from the common law approach to the categorization of contracts.For example,a contract code in the common law tradition would probably not differentiate a contract for warehousing from a contract for storage;or a contract for commission from a contract for brokerage or intermediation. Common law jurisdictions may,nevertheless,employ compatible expressions.It is also unlikely that a common law jurisdiction would regard a contract for the performance of work or a contract for the development of technology as a special category of contract.The problem is deciding whether it is reasonable and practical for a stat- ute to list exclusively all types of contracts which may emerge in commercial practice;and,moreover,whether it is possible for the specified categories to cover all variations of contractual relation- ships arising from commercial reality.The Code leans heavily to- wards the continental law tradition in that it attempts to rationalize the system of contract law by dividing contract law into either gen- 15.See id.arts.269-87(including the regulation of design,survey,and project construction contracts). 16.See id.arts.288-321 (regulating transportation contracts between carriers and passengers or shippers of goods). 17.See id.arts.322-64(covering contracts for the development and transfer of technology,as well as contracts for consultation of a technical nature and the pro- vision of specific technical expertise). 18.See id.arts.365-80(regulating contracts between storing and safekeeping parties). 19.See C.CoNT.L.,supra note 2,arts.381-95 (defining the relationship be- tween storing and safekeeping parties to a warehousing contract). 20.See id.arts.396-413 (covering contracts between principals and agents wherein it is agreed that the agent will act for the principal). 21.See id.arts.414-23 (outlining the duties owed by parties to a brokerage contract,under which a broker trades for the principal with the principal's money). 22.See id.arts.424-27(regulating transactions involving the use of a"middle man”)

AM. U. INT' L. REV[ the performance of specific works;'" transportation;' 6 strg;8 waeosn;9 •• 20 2 technology;" storage;" warehousing; commission; brokerage;" and intermedia￾tion. The categories of specific contracts listed in the Code reflect Chi￾nese perceptions of contracts and contractual relationships in com￾mercial transactions. These categories differ from the common law approach to the categorization of contracts. For example, a contract code in the common law tradition would probably not differentiate a contract for warehousing from a contract for storage; or a contract for commission from a contract for brokerage or intermediation. Common law jurisdictions may, nevertheless, employ compatible expressions. It is also unlikely that a common law jurisdiction would regard a contract for the performance of work or a contract for the development of technology as a special category of contract. The problem is deciding whether it is reasonable and practical for a stat￾ute to list exclusively all types of contracts which may emerge in commercial practice; and, moreover, whether it is possible for the specified categories to cover all variations of contractual relation￾ships arising from commercial reality. The Code leans heavily to￾wards the continental law tradition in that it attempts to rationalize the system of contract law by dividing contract law into either gen- 15. See id. arts. 269-87 (including the regulation of design, survey, and project construction contracts). 16. See id. arts. 288-321 (regulating transportation contracts between carriers and passengers or shippers of goods). 17. See id. arts. 322-64 (covering contracts for the development and transfer of technology, as well as contracts for consultation of a technical nature and the pro￾vision of specific technical expertise). 18. See id. arts. 365-80 (regulating contracts between storing and safekeeping parties). 19. See C. CONT. L., supra note 2, arts. 381-95 (defining the relationship be￾tween storing and safekeeping parties to a warehousing contract). 20. See id. arts. 396-413 (covering contracts between principals and agents wherein it is agreed that the agent will act for the principal). 21. See id. arts. 414-23 (outlining the duties owed by parties to a brokerage contract, under which a broker trades for the principal with the principal's money). 22. See id. arts. 424-27 (regulating transactions involving the use of a "middle man"). [ 15:209

1999] PRC CODE OF CONTRACT LAI 215 eral principles or specific rules;and furthermore establishes a rela- tively comprehensive and exclusive list of specific contracts in China.The effectiveness of this system remains unproven.The Code acknowledges the difficulty inherent in establishing a truly exclusive list of specific contracts and provides for the regulation of contrac- tual relationships that do not fall under any of the fifteen types of specific contract.The latter provision in Article 124 of the Code is expected to achieve the goal of uniformity in the contract law of the PRC. B.UNIFORMITY UNDER THE CODE OF CONTRACT LAW? When the Code came into force on October 1,1999,certain con- tract laws ceased to operate."The Code,therefore.attempts to unify contract law based on three separate statutes;however,it is question- able whether the Code can actually achieve the uniformity of con- tract law in the PRC. The foregoing issue of uniformity must be examined by referring to the meaning of"contract"under the Code.Article 2 of the Code expressly states that contract refers to an agreement made between subjects of equal footing,including natural persons,legal persons, and other organizations,for the purpose of establishing,changing,or terminating certain relationships based on civil rights and obliga- tions.Certain relationships,however,are excluded from this defini- tion,including those agreements affecting the status of a person or the relationship between persons,such as marriage,adoption,and guardianship,which are regulated by other laws.*The definition of contract under Article 2 extends to many contractual relationships that fall outside of the aforementioned specific categories of contract. 23.See id.art.124 (stating that where a contract does not fall within one of the specific laws,it should be dealt with either through the General Provisions in the first part of the Code,or by applying the specific contractual provisions that come closest to meeting the characteristics of the contract in question). 24.See C.CoNT.L.,supra note 2,art.428(declaring that with the coming into force of the Code,three existing codes would cease to have effect:the Economic Contract Law,the Foreign Economic Contract Law,and the Technology Contract Law). 25.See id. 26.See id

PRC CODE OF CONTRACTL.4 1 eral principles or specific rules; and furthermore establishes a rela￾tively comprehensive and exclusive list of specific contracts in China. The effectiveness of this system remains unproven. The Code acknowledges the difficulty inherent in establishing a truly exclusive list of specific contracts and provides for the regulation of contrac￾tual relationships that do not fall under any of the fifteen types of specific contract.3 The latter provision in Article 124 of the Code is expected to achieve the goal of uniformity in the contract law of the PRC. B. UNIFORMITY UNDER THE CODE OF CONTRACT LAW? When the Code came into force on October 1, 1999, certain con￾tract laws ceased to operate.2 ' The Code, therefore, attempts to unify contract law based on three separate statutes; however, it is question￾able whether the Code can actually achieve the uniformity of con￾tract law in the PRC. The foregoing issue of uniformity must be examined by referring to the meaning of "contract" under the Code. Article 2 of the Code expressly states that contract refers to an agreement made between subjects of equal footing, including natural persons, legal persons, and other organizations, for the purpose of establishing, changing, or terminating certain relationships based on civil rights and obliga￾tions. Certain relationships, however, are excluded from this defini￾tion, including those agreements affecting the status of a person or the relationship between persons, such as marriage, adoption, and guardianship, which are regulated by other laws.26 The definition of contract under Article 2 extends to many contractual relationships that fall outside of the aforementioned specific categories of contract. 23. See id. art. 124 (stating that where a contract does not fall within one of the specific laws, it should be dealt with either through the General Provisions in the first part of the Code, or by applying the specific contractual provisions that come closest to meeting the characteristics of the contract in question). 24. See C. CONT. L., supra note 2, art. 428 (declaring that with the coming into force of the Code, three existing codes would cease to have effect: the Economic Contract Law, the Foreign Economic Contract Law, and the Technology Contract Law). 25. See id. 26. See id. 1999] 215

216 AM.U.INT'L L.REV. [15:209 Examples include:settlements between disputing parties for the pur- pose of resolving their dispute;contracts between Chinese and for- eigners,including Hong Kong,parties for the establishment of joint equity ventures in China;and contracts between private institutions or individuals with private students for the purpose of providing edu- cational services.Similarly,a contractual relationship may exist be- tween a public university and one of its students under Article 2, though such contractual relationship is not expressly regulated in the Code.Can the Code deal with these contractual relationships effec- tively? It may be argued that a concept of"general contract,"as opposed to the fifteen types of"specific contracts"identified in the Code ex- ists in Article 2 of the Code.As noted above,Article 124 of the Code deals with all contracts that fall outside the specific provisions.If there is no special law regulating such contracts,they are subject to the general principles set forth in the Code.or can be dealt with by analogy to the contract rules applicable to the specific contracts. Whenever appropriate,such contracts may also be dealt with by analogy to the"other"relevant laws."Wide and flexible judicial dis- cretion should be expected in the application of Article 124.De- pending on the nature of the contractual relationship,the court may sometimes face a situation where the Code does not provide definite guidance.For example,a court may have difficulty where the agree- ment is for the settlement of a dispute reached during negotiation or mediation;or,where there may be conflicting or inconsistent princi- ples between the Code and other relevant laws,such as a contract for the establishment of a joint equity venture. These ambiguities result in a multitude of questions including the following.Should a contract for the establishment of a joint equity venture be subject to the Code of Contract Law?If so,what is the relationship between the Code and the Joint Equity Venture Law? Can the relationship between the Code and the Joint Equity Venture Law be compared with the relationship between the Code and the Companies Law because a contractual relationship exists among the 27.See id. 28.See C.CONT.L.,supra note 2;see also infra notes 67-68 (speculating on the identity of the "other laws")

AM. U. INT'L L. REV[ Examples include: settlements between disputing parties for the pur￾pose of resolving their dispute; contracts between Chinese and for￾eigners, including Hong Kong, parties for the establishment of joint equity ventures in China; and contracts between private institutions or individuals with private students for the purpose of providing edu￾cational services. Similarly, a contractual relationship may exist be￾tween a public university and one of its students under Article 2, though such contractual relationship is not expressly regulated in the Code. Can the Code deal with these contractual relationships effec￾tively? It may be argued that a concept of "general contract," as opposed to the fifteen types of "specific contracts" identified in the Code ex￾ists in Article 2 of the Code. As noted above, Article 124 of the Code deals with all contracts that fall outside the specific provisions. If there is no special law regulating such contracts, they are subject to the general principles set forth in the Code, or can be dealt with by analogy to the contract rules applicable to the specific contracts. Whenever appropriate, such contracts may also be dealt with by analogy to the "other" relevant laws.28 Wide and flexible judicial dis￾cretion should be expected in the application of Article 124. De￾pending on the nature of the contractual relationship, the court may sometimes face a situation where the Code does not provide definite guidance. For example, a court may have difficulty where the agree￾ment is for the settlement of a dispute reached during negotiation or mediation; or, where there may be conflicting or inconsistent princi￾ples between the Code and other relevant laws, such as a contract for the establishment of a joint equity venture. These ambiguities result in a multitude of questions including the following. Should a contract for the establishment of a joint equity venture be subject to the Code of Contract Law? If so, what is the relationship between the Code and the Joint Equity Venture Law? Can the relationship between the Code and the Joint Equity Venture Law be compared with the relationship between the Code and the Companies Law because a contractual relationship exists among the 27. See id. 28. See C. CONT. L., supra note 2; see also infra notes 67-68 (speculating on the identity of the "other laws"). 216 [ 15:209

1999] PRC CODE OF CONTRACT LAW 217 shareholders of a company set up under the Companies Law?Given the existence of these unexplored issues,it may be argued that the Code has not actually achieved complete uniformity in the contract law of the PRC.At a minimum,however,it is evident that limited uniformity is achieved by the Code,thoroughly unifying of the three former contract statutes in China. II.THE RELATIONSHIP BETWEEN THE VIENNA SALES CONVENTION AND THE CODE OF CONTRACT LAW China ratified the Vienna Sales Convention in 1986 and it remains in force in the PRC today.In the event of an inconsistency between the Convention and the Code,the Convention prevails.This princi- ple of Chinese civil law forms the basis for resolving any inconsis- tency or contradiction between an international convention and the Chinese domestic law in question.It also defines the relationship between the Convention and the Code.The relationship is twofold: in the case of inconsistency,the Convention prevails;and in the ab- sence of inconsistency,the Convention supplements the Code.The meaning of"inconsistency"arises as an important issue.Should"in- consistency"include both"direct and indirect,"or alternatively both "express and implicit"inconsistencies?The supplementary relation- ship between the Convention and the Code,and the uncertainty in the meaning of "inconsistency"give rise to a need for a comparative study of the Convention and the Code. In general,the Vienna Sales Convention applies to a contract of sale between parties from different countries,"and the Code of Con- tract Law applies to both contracts between two parties carrying on businesses within the territory of the PRC and contracts between 29.See C.CONT.L.,supra note 2. 30.See C.CIv.L.,supra note 3,art.142 (providing that in the event that in- consistent provisions exist,international treaties,ratified or acceded by the PRC, prevail over domestic laws concerning civil matters).If,however,the inconsis- tency is subject to a reservation to the international treaty made by the PRC at the time of ratification or accession,the domestic provision prevails.See id. 31.See Vienna Sales Convention,supra note 1.art.I(a)(defining the sphere of application of the Vienna Sales Convention)

PRC CODE OF CONTRACT LA " shareholders of a company set up under the Companies Law? Given the existence of these unexplored issues, it may be argued that the Code has not actually achieved complete uniformity in the contract law of the PRC. At a minimum, however, it is evident that limited uniformity is achieved by the Code, thoroughly unifying of the three former contract statutes in China. 9 II. THE RELATIONSHIP BETWEEN THE VIENNA SALES CONVENTION AND THE CODE OF CONTRACT LAW China ratified the Vienna Sales Convention in 1986 and it remains in force in the PRC today. In the event of an inconsistency between the Convention and the Code, the Convention prevails." This princi￾ple of Chinese civil law forms the basis for resolving any inconsis￾tency or contradiction between an international convention and the Chinese domestic law in question. It also defines the relationship between the Convention and the Code. The relationship is twofold: in the case of inconsistency, the Convention prevails; and in the ab￾sence of inconsistency, the Convention supplements the Code. The meaning of "inconsistency" arises as an important issue. Should "in￾consistency" include both "direct and indirect," or alternatively both "express and implicit" inconsistencies? The supplementary relation￾ship between the Convention and the Code, and the uncertainty in the meaning of "inconsistency" give rise to a need for a comparative study of the Convention and the Code. In general, the Vienna Sales Convention applies to a contract of sale between parties from different countries," and the Code of Con￾tract Law applies to both contracts between two parties carrying on businesses within the territory of the PRC and contracts between 29. See C. CONT. L., supra note 2. 30. See C. Civ. L., supra note 3, art. 142 (providing that in the event that in￾consistent provisions exist, international treaties, ratified or acceded by the PRC, prevail over domestic laws concerning civil matters). If, however, the inconsis￾tency is subject to a reservation to the international treaty made by the PRC at the time of ratification or accession, the domestic provision prevails. See hi. 31. See Vienna Sales Convention, supra note 1, art. 1 (a) (defining the sphere of application of the Vienna Sales Convention). 1999]