Chapter 4: Performance Of Contracts | Doing Business with China

Article 60 The parties shall perform their obligations thoroughly according to the terms of the contract.

The parties shall abide by the principle of good faith and perform the obligations of notice, assistance and maintaining confidentiality, etc based on the character and purpose of the contract or the transaction practices.

Article 61 Where, after the contract becomes effective, there is no agreement in the contract between the parties on the terms regarding quality, price or remuneration and place of performance, etc or such agreement is unclear, the parties may agree upon supplementary terms through consultation. In case of a failure in doing so, the terms shall be determined from the context of relevant clauses of the contract or by transaction practices.

Article 62 If the relevant terms of a contract are unclear, nor can it be determined according to the provisions of Article 61 of this Law, the provisions below shall be applied:

If quality requirements are unclear, the State standards or trade standards shall be applied; if there are no State standards or trade standards, generally held standards or specific standards in conformity with the purpose of the contract shall be applied.
If the price or remuneration is unclear, the market price of the place of performance at the time concluding the contract shall be applied; if the government-fixed price or government-directed price shall be followed in accordance with the law, the provisions of the law shall be applied.
If the place of performance is unclear, and the payment is currency, the performance shall be effected at the place of location of the party receiving the payment; if real estate is to be delivered, the performance shall be effected at the place of location of the real estate; in case of other contract objects, the performance shall be effected at the place of location of the party fulfilling the obligations.
If the time limit for performance is unclear, the obligor may at any time fulfil the obligations towards the obligee; the obligee may also demand at any time that the obligor performs the obligations, but a time period for necessary preparation shall be given to the obligor.
If the method of performance is unclear, the method which is advantageous to realize the purpose of the contract shall be adopted.
If the burden of the expenses of performance is unclear, the cost shall be assumed by the obligor.

Article 63 In cases where the government-fixed price or government- directed price is followed in a contract, if the said price is readjusted within the time limit for delivery as stipulated in the contract, the payment shall be calculated according to the price at the time of delivery. If the delivery of the object is delayed and the price has risen, the original price shall be adopted; while the price has dropped, the new price shall be adopted. In the event of delay in taking delivery of the object or late payment, if the price has risen, the new price shall be adopted; while the price has dropped, the original price shall be adopted.

Article 64 Where the parties agree that the obligor performs the obligations to a third party, and the obligor fails to perform the obligations to the third party or the performance does not meet the terms of the contract, the obligor shall be liable to the obligee for the breach of contract.

Article 65 Where the parties agree that a third party performs the obligations to the obligee, and the third party fails to perform the obligations or the performance does not meet the terms of the contract, the obligor shall be liable to the obligee for the breach of contract.

Article 66 If both parties have obligations towards each other and there is no order of priority in respect of the performance of obligations, the parties shall perform the obligations simultaneously . One party has the right to reject the other party's request for performance before the other party's performance. One party has the right to reject the other party's corresponding request for performance if the other party's performance does not meet the terms of the contract.

Article 67 Where both parties have obligations towards each other and there has been an order of priority in respect of the performance, and the party which shall render its performance first has not rendered the performance, the party which may render its performance lately has the right to reject the other party's request for performance. Where the party which shall render its performance first violates the terms of a contract while fulfilling the obligations, the party which may render its performance lately has the right to reject the other party's corresponding request for performance.

Article 68 One party, which shall render its performance first, may suspend its performance, if it has conclusive evidence that the other party is under any of the following circumstances:

Its business conditions are seriously deteriorating;
It moves away its property and takes out its capital secretly to evade debt;
It loses its commercial credibility;
Other circumstances showing that it loses or is possible to lose the capacity of credit.

Where a party suspends performance of a contract without conclusive evidence, it shall be liable for the breach of contract.

Article 69 One party to a contract which suspends its performance of the contract in accordance with the provisions of Article 68 of this Law, shall promptly inform the other party of such suspension. It shall resume its performance of the contract when the other party provides a sure guarantee. After the suspension of the performance, if the other party does not reinstate its capacity of performance and does not provide with a sure guarantee, the party suspending performance of the contract may rescind the contract.

Article 70 If the obligee does not notify the obligor its separation, merger or a change of its domicile so as to make it difficult for the obligor to perform the obligations, the obligor may suspend the performance of the contract or have the object deposited.

Article 71 The obligee may reject an advance performance of the contract by the obligor, except that the advance performance does not damage the interests of the obligee.

Additional expenses caused to the obligee by advance performance shall be borne by the obligor.

Article 72 The obligee may reject the partial performance of the contract by the obligor, except that the partial performance does not damage the interests of the obligee.

Additional expenses caused to the obligee by partial performance shall be borne by the obligor.

Article 73 If the obligor is indolent in exercising its due creditor's right, thus damaging the interests of the obligee, the obligee may request the people's court for subrogation in its own name , except that the creditor's right exclusively belongs to the obligor.

The subrogation shall be exercised within the scope of the creditor's right of the obligee. The necessary expenses caused to the obligee by exercising subrogation shall be borne by the obligor.

Article 74 If the obligor renounces its due creditor's right or transfers its property gratis, thus damaging the interests of the obligee, the obligee may request the people's court to revoke the obligor's act. If the obligor transfers its property at an obviously unreasonable low price, thus damaging the interests of the obligee, and the transferee knows such situation, the obligee may request the people's court to revoke the obligor's act.

The right of revocation shall be exercised within the scope of the creditor's right of the obligee. The necessary expenses caused to the obligee by exercising the right of revocation shall be borne by the obligor.

Article 75 The time limit for exercising the right of revocation shall be one year, commencing from the day when the obligee is aware or ought to be aware of the causes of revocation. If the right of revocation has not been exercised within five years from the day when the act of the obligor takes place, the right of revocation shall be extinguished.

Article 76 After a contract becomes effective, the parties may not reject to perform the obligations of the contract because of modification of the title or name of the parties, or change of the statutory representative, the responsible person or the executive person of the parties.