China Supreme People's Court Released Interpretation on the Application of the General Principles of the Contract Part of the Civil Code -Part 2
Time:2024-01-25 17:25:06Source:Click:次
(continued from last article)
III. Validity of contracts
Article 11 If one of the parties is a natural person and, based on the age, intelligence, knowledge and experience of the party concerned and in combination with the complexity of the transaction, it can be determined that he lacks the necessary cognitive capacity to understand the nature of the contract, the legal consequences of its conclusion or the specific risks arising from the transaction,The people's Court may determine that the situation constitutes "lack of judgment" as provided for in Article 151 of the Civil Code.
Article 12 After a contract is established in accordance with the law, if a party who is obligated to submit for approval fails to perform its obligation to submit for approval or the performance of its obligation to submit for approval is not in conformity with the provisions of the contract or the provisions of laws and administrative regulations, and the other party requests it to continue to perform its obligation to submit for approval, the people's court shall support it;Where the other party claims to terminate the contract and requests it to bear the liability for compensation for breach of the obligation to submit for approval, the people's court shall support it.
If, after the people's court has ruled that one of the parties shall perform its obligation to submit a report for approval, and it still fails to do so, and the other party claims to terminate the contract and requests it to bear the liability for compensation with reference to the liability for breach of contract, the people's court shall support such a request.
If, prior to the approval of the contract, one of the parties sues to request the other party to perform the main obligations agreed upon in the contract, and refuses to change the litigation request after an explanation, the people's court shall decide to reject the litigation request, but without prejudice to the possibility of filing a separate lawsuit.
If the party with the obligation to submit an application for approval has gone through the formalities of applying for approval or has fulfilled its obligation to submit an application for approval as determined by a judgment in force, and the approving authority decides not to approve the contract, and the other party requests that the other party be held liable for damages, the people's court shall not support the request. However, if the contract is not approved due to reasons attributable to the party concerned, such as delay in fulfilling the obligation to submit an application for approval, and the other party requests compensation for the loss suffered as a result, the people's court shall deal with the matter in accordance with the provisions of Article 157 of the Civil Code.
Article 13 Where a contract is invalid or voidable and the parties claim that the contract is valid on the grounds that the contract has been filed with the relevant administrative department, has been approved by the approving authority, or has been registered in accordance with the contract for changes in property rights or for transfer of property rights, the people's court shall not support the validity of the contract.
Article 14 Where the parties conclude multiple contracts for the same transaction, the people's court shall determine that the contract concluded with a false expression of intention is invalid. Where a party conceals a true intention with a false expression of intent in order to circumvent the mandatory provisions of laws or administrative regulations, the people's court shall determine the validity of the concealed contract in accordance with the provisions of the first paragraph of Article 153 of the Civil Code; Where a party conceals a true expression of intention by a false expression of intention in order to circumvent the provisions of laws or administrative regulations on formalities such as approval of a contract, the people's court shall determine the validity of the concealed contract in accordance with the provisions of the second paragraph of Article 502 of the Civil Code.
Where a concealed contract is found to be invalid or determined to be ineffective under the preceding paragraph, the people's court shall use the concealed contract as the factual basis for determining the civil liability of the parties in accordance with the provisions of Article 157 of the Civil Code, unless otherwise provided by law.
Where the parties have entered into a number of contracts in respect of the same transaction, all of which are true expressions of intent, and where there are no other circumstances affecting the validity of the contract, the people's court shall, on the basis of ascertaining the sequence of the establishment of the various contracts and their actual fulfillment, determine whether or not there has been a change in the content of the contract. Where laws or administrative regulations prohibit changes in the content of the contract, the people's court shall determine that the corresponding changes in the contract are invalid.
Article 15 In determining the relationship of rights and obligations between the parties, the people's court shall not be limited to/be bound by the name used in the contract, but shall be based on the content agreed upon in the contract.If the rights and obligations claimed by the parties are inconsistent with the rights and obligations determined according to the content of the contract, the people's court shall determine the actual civil legal relationship between the parties in light of the facts such as the contracting background, the purpose of the transaction, the transaction structure, the performance and whether the parties have fabricated the transaction object.
Article 16 If a contract violates the mandatory provisions of laws or administrative regulations in one of the following circumstances, and if the administrative or criminal penalty of the perpetrator can realize the legislative purpose of the mandatory provisions, the people's court may, in accordance with the provisions of the first paragraph of Article 153 of the Civil Code on "except that the compulsory provision does not cause the civil juristic act to be invalid", determine that the contract is not invalid because of the violation of the compulsory provision (the violation of the compulsory provision does not cause the contract invalid)
(1) Although the mandatory provisions are aimed at maintaining public order, the actual performance of the contract has a significantly lesser impact on public order, and the determination that the contract is null and void will lead to unfair and unjust results in the handling of the case;
(2) The mandatory provisions are aimed at safeguarding the government's national interests such as taxes and land concessions or the legitimate interests of other civil subjects rather than the civil rights and interests of the parties to the contract, and the determination of the validity of the contract will not affect the realization of the purpose of the norm;
(3) The mandatory provisions are intended to require one party to strengthen risk control, internal management, etc., and the other party has no ability or obligation to review whether the contract violates the other party’s mandatory provisions, and deciding the contract invalid will cause it to bear adverse consequences;
(4) Although one party violated the mandatory provisions when entering into the contract, it violated the principle of good faith and failed to make corrections after the conclusion of the contract when it already had the conditions to correct the violation;
(5) Other circumstances provided for by laws and judicial interpretations.
If the mandatory provisions of laws and administrative regulations are intended to regulate the performance of the contract after the conclusion of the contract, and the parties request that the contract be invalid on the grounds that the contract violates the mandatory provisions, the people's court shall not support it. However, unless the performance of the contract inevitably leads to a violation of mandatory provisions or otherwise provided for by law or judicial interpretation.
If a contract is determined to be valid in accordance with the preceding two paragraphs, but the illegal acts of the parties have not been dealt with, the people's court shall put forward judicial suggestions to the relevant administrative department.If a party's conduct is suspected of committing a crime, the clues of the case shall be transferred to the criminal investigation organ;If it is a criminal private prosecution case, the parties shall be informed that they may file a separate lawsuit with the people's court having jurisdiction.
Article 17 Although a contract does not violate the mandatory provisions of laws and administrative regulations, under any of the following circumstances, the people's court shall determine that the contract is invalid in accordance with the provisions of the second paragraph of Article 153 of the Civil Code:
(1) The contract affects political security, economic security, military security and other national security;
(2) The contract is contrary to social and public order, such as affecting social stability, fair competition order or harming social and public interests;
(3) The contract deviates from social morality, family ethics, or damages personal dignity or other good customs.
In determining whether a contract is contrary to public order and good morals, the people's court shall be guided by core socialist values, taking into account such factors as the subjective motives of the parties and the purpose of the transaction, the intensity of supervision by governmental departments, the frequency with which the parties have engaged in similar transactions within a certain period of time, and the social consequences of the acts, and shall fully reason the matter out in the adjudicatory instrument. Where the parties concerned do engage in a transaction because they need to make a living, which does not have a significant impact on public social order and does not affect national security or contravene good customs, the people's court shall not find the contract to be invalid.
Article 18 If the provisions of a law or administrative regulation contain expressions such as "shall", "must" or "shall not", but the purpose of such provisions is to restrict or confer civil rights, and the violation of such provisions by the perpetrator will lead to an unauthorized disposition, unauthorized agency or ultra vires representation, or results in the contractual counterparty or third party obtaining the right to revoke or terminate the contract, the people's court shall determine the validity of the contract on the basis of the civil legal consequences of violating such a provision as stipulated in the law or administrative regulation.
Article 19 Where a contract concluded for the purpose of transferring or creating property rights is claimed to be invalid by the parties or the real right holder only on the ground that the assignor had no ownership or right to dispose of the subject matter at the time of conclusion of the contract, the people's court shall not support it; Where the contract cannot be performed due to the assignor has not obtained the consent of the real right holder afterwards or has not obtained the right to dispose of the contract afterwards, and the assignee claims to terminate the contract and requests the assignor to bear the liability for breach of the contract, the people's court shall support it according to law.
Where the contract provided for in the preceding paragraph is found to be valid, and the assignor has delivered or transferred the property to the assignee, and the real right holder requests that the property rights have not changed or requests the return of the property, the people's court shall support it. However, except where the assignee obtains property rights in good faith in accordance with the provisions of Article 311 of the Civil Code.
Article 20 If a law or administrative regulation, in order to restrict the representation right of a legal representative of a legal person or a person in charge of an unincorporated organization, stipulates that the matters involved in a contract shall be resolved by the power or decision-making body of the legal person or unincorporated organization or shall be decided by the executive body of the legal person or unincorporated organization, and the legal representative or person in charge concludes a contract in the name of the legal person or unincorporated organization without obtaining the authority, the People's Court will not support the claim of the counterparty that the contract is effective for the legal person or unincorporated organization and that he or she is liable for breach of contract. The people's court shall not support the claim of the counterparty who has not fulfilled the obligation of reasonable examination that the contract is valid for the legal person or unincorporated organization and that the counterparty shall be held liable for breach of contract; however, if the legal person or unincorporated organization is at fault, the people's court may adjudge that it shall be held liable for the corresponding damages in accordance with the provisions of Article 157 of the Civil Code. Where the counterparty has fulfilled the obligation of reasonable examination and constitutes an apparent representative, the people's court shall deal with the matter in accordance with the provisions of Article 504 of the Civil Code.
If the matters covered by the contract do not exceed the representative authority of the legal representative or person in charge as provided for in laws and administrative regulations, but exceed the limitations on the representative authority of the legal person or unincorporated organization as set forth in its articles of incorporation or authority, and the counterparty claims that the contract is valid for the legal person or unincorporated organization and that it bears the responsibility for the breach of contract, the People's Court shall, in accordance with the law, give its support to the counterparty. However, unless the legal person or unincorporated organization proves that the counterparty knew or should have known of the restriction.
If a legal person or an unincorporated organization, after incurring civil liability, recovers the losses caused by an act of ultra vires representation from the legal representative or person in charge who is at fault, the people's court shall, in accordance with the law, support the recovery. Where laws or judicial interpretations provide otherwise with respect to the civil liability of legal representatives or persons in charge, such provisions shall be followed.
Article 21 If a staff member of a legal person or an unincorporated organization enters into a contract in the name of the legal person or unincorporated organization in respect of a matter exceeding the scope of his or her competence, and if the counterparty claimed that the contract was effective against the legal person or unincorporated organization and that the latter should bear the liability for breach of contract, the people's court shall not support such a claim. However, if the legal person or unincorporated organization is at fault, the people's court may refer to the provisions of Article 157 of the Civil Code and decide that it shall bear the corresponding liability. In the foregoing cases, if they constitute apparent agency, the people's court shall deal with them in accordance with the provisions of Article 172 of the Civil Code.
If the matters covered by the contract fall under one of the following circumstances,The people's court shall find that the staff member of a legal person or an unincorporated organization exceeded his or her powers of competence in concluding the contract:
(1) Matters which should be resolved by the authority or decision-making body of a legal person or an unincorporated organization in accordance with the law,;
(2) Matters that should be decided by the executive body of a legal person or unincorporated organization in accordance with the law;
(1) Matters that should be implemented on behalf of legal persons and unincorporated organizations by legal representatives or persons in charge in accordance with the law;
(4) Matters that are not normally dealt with ex officio.
Where the matters covered by a contract do not exceed the terms of reference determined in accordance with the preceding paragraph, but exceed the limitations on the terms of reference of a legal person or an unincorporated organization in respect of its staff members, the people's court shall support the claim of the counterparty that the contract is valid in respect of the legal person or the unincorporated organization and that the latter should bear the liability for breach of contract. However, unless the legal person or unincorporated organization proves that the counterparty knew or should have known of the limitation.
Where a legal person or an unincorporated organization has assumed civil liability and then seeks to recover compensation from an intentional or grossly negligent staff member, the people's court shall, in accordance with the law, support the recovery.
Article 22 If a legal representative, person in charge or staff member concludes a contract under the name of a legal person or an unincorporated organization without exceeding his or her authority, and the legal person or unincorporated organization claims that the contract is ineffective solely on the ground that the seal affixed to the contract is not a seal for record or that it is a counterfeit, the people's court shall not support such a claim.
Where a contract is concluded in the name of a legal person or an unincorporated organization, but is signed or fingerprinted only by the legal representative, person in charge or staff member without the seal of the legal person or unincorporated organization being affixed, and where the counterparty is able to prove that the legal representative, person in charge or staff member has not exceeded the limits of his or her authority in the conclusion of the contract, the people's court shall determine that the contract is valid for the legal person or unincorporated organization. However, unless the parties have agreed to make the affixing of the seal a condition for the formation of the contract.
Where a contract is sealed only with the seal of a legal person or an unincorporated organization without the signature or fingerprints of any person, and the counterparty is able to prove that the contract was concluded by a legal representative, person in charge or a staff member within the scope of his or her authority, the people's court shall determine that the contract is valid for the legal person or the unincorporated organization.
In the circumstances provided for in the preceding three paragraphs, if the legal representative, responsible person or staff member, although exceeding the authority of representative or agency at the time of conclusion of the contract, constitutes an ostensible representative in accordance with the provisions of Article 504 of the Civil Code, or constitutes an ostensible agent in accordance with the provisions of Article 172 of the Civil Code, the people's court shall determine that the contract is effective for a legal person or an unincorporated organization.
Article 23 Where a legal representative, responsible person or agent maliciously colludes with a counterpart to conclude a contract in the name of a legal person or unincorporated organization, thereby harming the legitimate rights and interests of the legal person or unincorporated organization, and the legal person or unincorporated organization claims not to bear civil liability, the people's court shall support it.
Where a legal person or an unincorporated organization demands that the legal representative, person in charge or agent bear joint and several liability with the counterparty for damages suffered as a result, the people's court shall support the request.
f the people's court, based on the evidence provided by a legal person or an unincorporated organization, comprehensively considers the trading habits between the parties, whether the contract is obviously unfair at the time of conclusion, whether the relevant person has obtained improper benefits, the performance of the contract and other factors, is able to determine that there is a high probability of malicious collusion between the legal representative, the person in charge or the agent and the counterpart,The aforementioned personnel may be required to make statements or provide corresponding evidence on relevant facts such as the process of contract conclusion and performance.If they refuse to make a statement without justifiable reasons, or the statement is unreasonable and cannot provide corresponding evidence, the people's court may determine that the fact of malicious collusion is established.
Article 23 Where a legal representative, responsible person or agent maliciously colludes with a counterpart to conclude a contract in the name of a legal person or unincorporated organization, thereby harming the legitimate rights and interests of the legal person or unincorporated organization, and the legal person or unincorporated organization claims not to bear civil liability, the people's court shall support it.
Where a legal person or an unincorporated organization demands that the legal representative, person in charge or agent bear joint and several liability with the counterparty for damages suffered as a result, the people's court shall support the request.
f the people's court, based on the evidence provided by a legal person or an unincorporated organization, comprehensively considers the trading habits between the parties, whether the contract is obviously unfair at the time of conclusion, whether the relevant person has obtained improper benefits, the performance of the contract and other factors, is able to determine that there is a high probability of malicious collusion between the legal representative, the person in charge or the agent and the counterpart,The aforementioned personnel may be required to make statements or provide corresponding evidence on relevant facts such as the process of contract conclusion and performance.If they refuse to make a statement without justifiable reasons, or the statement is unreasonable and cannot provide corresponding evidence, the people's court may determine that the fact of malicious collusion is established.
Article 25 If a contract is not established, is invalid, has been revoked or is determined to be ineffective, and one of the parties entitled to request the return of the price or remuneration requests the other party to pay fund occupation fees, the People's Court shall, within the scope of the request of the party, in accordance with the calculation method for the one-year loan prime rate (LPR) published by the National Interbank Funding Center authorized by the People’s Bank of China. However, if the party occupying the funds is not at fault for the contract not being established, invalid, revoked or determined to be ineffective, the calculation shall be based on the benchmark interest rate for similar deposits announced by the People's Bank of China for the same period.
If both parties are mutually liable for the obligation of return, the people's court shall support the party's claim for simultaneous performance; if the party in possession of the subject matter is in a situation where the subject matter is used or can be used in accordance with the law, and the other party requests that the funds occupation fee payable by the party and the subject matter usage fee to be collected should be offset against each other, the people's court shall support the request, unless otherwise provided for by the law.
(to be continued)
Disclaimer: This article is only for academic purpose and not intended for providing any legal advice for any specific cases, individuals or organizations.
