Page 202 - 2021 White Paper
P. 202
1 White Paper on the Business Environment in China
For example, during the outbreak of Covid-19, in c. Standard Clause System
order to ensure the emergency supply of epidemic
prevention materials and safeguard the public The Civil Code extends the applicable scope
lives and health, the State may issue mandatory of obligations of reminder and explanation for
orders to companies that manufacture protective those who employ standard clauses. A party
clothing or ventilators and force them to enter using standard clauses shall, in addition to the
into such purchase and sale contracts. In principle, obligation of reminder of clauses regarding relief
companies shall not refuse to enter into such or restriction of liabilities, has the obligation
contracts. of reminder and explanation on all the clauses
related to the material interests of the other party.
b. Preliminary Contract System What is a clause related to material interests? The
Civil Code, Article 470 provides general clauses
A preliminary contract is an agreement where that shall be included in a contract. Generally,
the parties agree to conclude a contract by a the clauses listed in this Article are related to
certain time in the future. It is a kind of contract the parties’ material interests, including object,
formation method widely used in subscriptions, quantity, quality, price or payment, term, location
purchase orders, commercial housing reservation and method of performance, liability for breach
agreements, etc. of contract and dispute settlement. There are
also certain laws that provide clauses related to
The previous Contract Law did not set forth material interests. For example, in a consumer
provisions for a preliminary contract. However, contract, a business operator shall remind the
Judicial Interpretation of Purchase and Sales consumer, in an obvious way, to pay attention to
Contract23, Article 2 reads: “if a party signs a the quantity, quality, price, cost, term and method
preliminary contract such as a subscription, of performance, safety precaution, risk warning,
purchase order, reservation, letter of intent, after-sale services, civil responsibility etc. of
memorandum, and agrees to conclude a sales and products or services24.
purchase contract by a certain time in the future,
but either party fails to perform its obligation to If the party providing standard clauses fails
conclude such sales and purchase contract, the to perform its obligation of reminder and
other party may request the non-performing explanation, the other party, instead of removing
party to assume liability for breach of preliminary such clauses in accordance with the previous
contract, or request termination of the preliminary Contract Law, has the right to claim that such
contract, and claim damages. A people’s court standard clauses shall not constitute a part of the
s h a l l s u s t a i n s u c h r e q u e s t ”. T h e c h a p t e r o n contract.
contracts in the Civil Code extends the scope of
the preliminary contract system from sales and d. Guarantee Contract
purchase contracts to all contracts, by providing
that a subscription, purchase order, reservation, After the implementation of the Law of Property
etc., under which the parties agree to enter into Rights, most provisions in the Guarantee Law are
a contract within a certain time in the future shall void, leaving only the “guarantee” part that is still
constitute a preliminary contract. If a party fails to applicable to the Guarantee Law. The Civil Code
perform its obligations to contract as agreed in the incorporates the provisions on “guarantee” in the
preliminary contract, the other party may claim Guarantee Law into the chapter on contracts.
liability of such party for breach of a preliminary
contract. The Guarantee Law provides that, if the parties
fail to reach any agreement, or reach an agreement
23 The Judicial Interpretation of Purchase and Sales Con- that is unclear, on the method of guarantee,
tracts, refers to the Interpretation by the Supreme People’s they shall bear the liabilities of guarantee in
Court on Issues of Applicable Laws for Review of Disputed
Cases regarding Purchase and Sales Contracts 24 Law on Protection of Rights and Interests of Consum-
er, Article 26 (1)
202
For example, during the outbreak of Covid-19, in c. Standard Clause System
order to ensure the emergency supply of epidemic
prevention materials and safeguard the public The Civil Code extends the applicable scope
lives and health, the State may issue mandatory of obligations of reminder and explanation for
orders to companies that manufacture protective those who employ standard clauses. A party
clothing or ventilators and force them to enter using standard clauses shall, in addition to the
into such purchase and sale contracts. In principle, obligation of reminder of clauses regarding relief
companies shall not refuse to enter into such or restriction of liabilities, has the obligation
contracts. of reminder and explanation on all the clauses
related to the material interests of the other party.
b. Preliminary Contract System What is a clause related to material interests? The
Civil Code, Article 470 provides general clauses
A preliminary contract is an agreement where that shall be included in a contract. Generally,
the parties agree to conclude a contract by a the clauses listed in this Article are related to
certain time in the future. It is a kind of contract the parties’ material interests, including object,
formation method widely used in subscriptions, quantity, quality, price or payment, term, location
purchase orders, commercial housing reservation and method of performance, liability for breach
agreements, etc. of contract and dispute settlement. There are
also certain laws that provide clauses related to
The previous Contract Law did not set forth material interests. For example, in a consumer
provisions for a preliminary contract. However, contract, a business operator shall remind the
Judicial Interpretation of Purchase and Sales consumer, in an obvious way, to pay attention to
Contract23, Article 2 reads: “if a party signs a the quantity, quality, price, cost, term and method
preliminary contract such as a subscription, of performance, safety precaution, risk warning,
purchase order, reservation, letter of intent, after-sale services, civil responsibility etc. of
memorandum, and agrees to conclude a sales and products or services24.
purchase contract by a certain time in the future,
but either party fails to perform its obligation to If the party providing standard clauses fails
conclude such sales and purchase contract, the to perform its obligation of reminder and
other party may request the non-performing explanation, the other party, instead of removing
party to assume liability for breach of preliminary such clauses in accordance with the previous
contract, or request termination of the preliminary Contract Law, has the right to claim that such
contract, and claim damages. A people’s court standard clauses shall not constitute a part of the
s h a l l s u s t a i n s u c h r e q u e s t ”. T h e c h a p t e r o n contract.
contracts in the Civil Code extends the scope of
the preliminary contract system from sales and d. Guarantee Contract
purchase contracts to all contracts, by providing
that a subscription, purchase order, reservation, After the implementation of the Law of Property
etc., under which the parties agree to enter into Rights, most provisions in the Guarantee Law are
a contract within a certain time in the future shall void, leaving only the “guarantee” part that is still
constitute a preliminary contract. If a party fails to applicable to the Guarantee Law. The Civil Code
perform its obligations to contract as agreed in the incorporates the provisions on “guarantee” in the
preliminary contract, the other party may claim Guarantee Law into the chapter on contracts.
liability of such party for breach of a preliminary
contract. The Guarantee Law provides that, if the parties
fail to reach any agreement, or reach an agreement
23 The Judicial Interpretation of Purchase and Sales Con- that is unclear, on the method of guarantee,
tracts, refers to the Interpretation by the Supreme People’s they shall bear the liabilities of guarantee in
Court on Issues of Applicable Laws for Review of Disputed
Cases regarding Purchase and Sales Contracts 24 Law on Protection of Rights and Interests of Consum-
er, Article 26 (1)
202
